The long-term trajectory of the global auto industry is mainly affected by four factors: regulations, environmentalism, industry competition (especially cross-industry), and protectionism. As for the recent vehicle power source debate, EVs (mainly BEVs) are apparently triumphant, becoming “the chosen one” among many new energy options and aiming to replace ICEs in twenty years completely. Although the EU passed the ban on ICE cars by 2035 last year and many major US states followed suit, such as California and New York, global auto industry giants/main markets, including China, India, Japan, etc., still have no plans to ban ICE sales. Despite the Japanese Government’s intention to follow the EU’s ICE ban, the Japanese auto industry’s immense pressure still holds ICE cars’ presence in its domestic market. However, six months after the announcement of the ICE ban, the EU announced seven stages of vehicle emission standards until 2025 (the roadmap is yet to be confirmed), adding fuel to the flame for ICE cars that are already faltering in market shares in recent years. With Euro 7 threatening ICE vehicles with an accelerated exit from the European and US markets, does it mean they will completely vanish in the global car market in the future?
Firstly, the Chinese car market, which takes up more than ⅓ of the global auto market, has been growing at a startling speed for the last two years of electrification. However, despite the Chinese government’s full support of “new energy cars” (including EVs, FCEVs, etc.) with national policies, the country does not have a schedule for phasing out ICE car sales. After Chinese self-owned automakers became successful by developing intelligent EVs, many domestic automakers partnered with international brands still need to expand operations and income with cheaper ICE cars that don’t require charging equipment in SE Asia, Central & South America, and even the Middle East and Africa. The expansive Chinese market is the perfect testing ground for these automakers. Moreover, despite the Euro 7 coming into force in 2025, many European carmakers oppose the idea, and many ICE models might give up matching up to Euro 7 due to higher manufacturing costs. Do these models simply go out of production? In my opinion, they will at most be discontinued in the European industry, while major markets that may not propose exhaust regulations according to Euro 7, such as China, Japan, and the US, will provide ample space and time for these models. Last but not least, we need to bring up the ICE industry giant: Japanese automakers. With India as the leading market, Japanese ICE cars (or hybrids that don’t require charging equipment) will continue to reign car markets in developing regions for a long time until there is widespread charging infrastructure.
As for the EV/ICE competition and dynamic in the coming decade, I have a few speculations:
2023~2025: the Chinese EV market reigns supreme. Chinese self-owned auto companies mass produce and market EVs with lower pricing and steadier supply chains, with Europe and SE Asia being their first step to expanding their global market share. Owing to Chinese EVs, EV’s global penetration rate will rapidly increase, achieving over 30% by 2025, even 35%.
2026~2030: the global EV market reaches peak growth. Traditional carmakers successively launch brand-new EV platforms: although their manufacturing costs lie on the higher end, their robust auto tech foundation has successfully attracted ICE car owners to purchase EVs. Although ICE vehicles can leverage a higher price-performance ratio to slow down losing customers, traditional automakers will give up some ICE sales due to increased costs in the European market where Euro 7 is in effect. Moreover, EV’s global penetration rate will likely hit 50% in 2028, crossing paths with ICE cars. Even though many research institutions have revised this intersection point to 2030, the updated estimation a few years earlier than its predecessor is still relatively conservative. First, the Chinese and European markets’ charging infrastructure have a fast and steady deployment that is beneficial to EV development; second, by 2030, US carmakers will have finished brand-new EV developments, which the government will fully support by accelerating charging infrastructure establishment; third, the introduction of next-gen solid batteries will force lithium batteries to cut prices, further diminishing EVs’ barrier to purchase.
After 2031: following the milestone of EV sales accounting for over 50% of total car sales in 2028, EVs’ sales growth rate will gradually slow down due to developing countries’ lack of power supply infrastructure restricting EV development. ICE cars in this era are largely developed pre-2025. With R&D amortization ending and decreasing pricing, these models are still irreplaceable with EVs in developing countries.
The advent of the EV age has been the consensus of the global auto industry. With EV platforms and triad (battery, electric control, motor) technologies speeding up the models’ life cycles, ICE cars will soon be obsolete. Although new energies such as e-fuel may replace gas and diesel in current ICE models, new technologies’ attractiveness will still be crucial for EVs’ steady dominance in the future car market development.