Tommaso Pardi - Perspectives, contradictions and consequences of the electrification of the European automotive industry

Notes:

Tommaso Pardi, Directeur du Gerpisa, chargé de recherche au CNRS (IDHES)

Full Text:

1. The forced march towards electrification
 
The speaker recalled that the European Union has put in place regulations since 2008 that require a progressive reduction in emissions from car manufacturers in successive stages (between 1998 and 2008 these were voluntary commitments). The next steps are, for example, to reach 95 g/km CO2 in 2021, 80 g/km in 2025 and finally 60 g/km in 2030. If these reductions are not met, manufacturers risk very high penalties (around €30 billion for the whole industry based on 2019 emission levels).
 
At first, diesel engines were seen as a way to reduce emissions. They consume less petrol and would therefore be less polluting (between 20-25% less CO2 emissions).
However, the diesel gate came to light in 2015. Manufacturers cheated, fraudulently reducing the polluting emissions of diesel and petrol engines during homologation tests. A significant discrepancy was discovered between emissions measurements in the laboratory and in real life. The discrepancy was as high as 45% for company vehicles. The car industry claimed to have reduced emissions by 30% between 2000 and 2015, but the real figure was around 10%.
Government institutions responded to the scandal by tightening environmental regulations. New tests have been introduced in Brussels and from 2021 onwards devices will be installed in vehicles to measure the reliability of the tests.
 
For Tommaso Pardi, these two factors (new regulations and diesel gate) have made it increasingly difficult for manufacturers to reduce CO2 emissions from cars. The only way to reach the 2020/2021 emission targets is to massively produce electric vehicles.
 
2. The headlong rush to move upmarket
 
For several years now, the speaker has observed a gradual move by manufacturers towards a more sophisticated range, which has led to an increase in emissions. For example, Pardi shows that the mass of vehicles has increased by 10% between 2008 and 2018 on average, which has increased emissions by 7%. If we go back even further in time, we see the same phenomenon: an increase in vehicle weight and therefore in emissions.
The same is true for engines. Their power is increasing, vehicles are becoming faster, and their acceleration is also increasing. These two factors also contribute to an increase in emissions. In a way, manufacturers have made it even more difficult for themselves to reduce emissions, which in turn has led them to "optimise" the approval tests.
 
Tommaso Pardi points out that moving upmarket may be a normal strategy for premium groups, but it is not clear that it is a viable strategy for generalist groups. The strength of the latter was previously to reduce the weight of vehicles, to make smaller, more compact and less expensive vehicles (Renault Twingo, Peugeot 205, Ford Fiesta, etc.). Has this strategy paid off for the generalists? No, because their share of the generalist market has fallen, as have their profits.
 
At the same time, it happens to be easier to comply with environmental regulations for heavy vehicles. In particular, it is easier to introduce 'green' technologies - diesel, direct petrol injection, etc. - in heavier and more expensive vehicles. - It is easier to introduce "green" technologies - diesel, direct petrol injection, etc. - in heavier and more expensive vehicles. He believes that one effect of this has been an upmarket drift, structurally pushing up the car market.

3. Lack of reflection on the reasons for regulatory failure
 
Paradoxically, the diesel gate did not provoke reflection or criticism of the regulatory framework. There has only been a tightening of the framework. Environmental NGOs played an important role in tightening the regulatory framework, but they did not push for its transformation. This is particularly true of Transport & Environment, an organisation that has become a key player in Brussels. T&E does not want to change the car market, it wants to electrify it.
It is not a question of preventing manufacturers from selling more polluting cars such as SUVs, but of equipping them with batteries. For Pardi, this is a liberal vision of ecology consistent with the "green deal" advocated by the new European Commission, mainly oriented by technological innovation. In this vision, technological innovation will finally allow manufacturers to adapt to regulation, while the transformation of mobility, the promotion of new automotive uses and the promotion of socially inclusive green mobility take a back seat.
 
Currently, the regulatory framework is based on vehicle weight, where reducing vehicle weight is not valued as it makes it more difficult to meet regulatory targets. According to the speaker, this has the effect of pushing manufacturers to move upmarket and at the same time to optimise type approval tests to compensate for the increase in emissions caused by this move upmarket. What would have happened if the regulatory framework had insisted on reducing the weight and power of vehicles instead of encouraging it?
 
For the moment, few actors, especially governmental ones, have questioned the regulation itself, which has however caused an upmarket drift in the car industry, which has made cars both heavier and more polluting. The environmental NGOs that raised the issue in 2007/2008 now seem to be abandoning it in favour of a political compromise on the electrification of existing vehicles.
 
Moreover, as the speaker showed, between 2001 and 2018, new cars have increasingly become luxury products, rather than products consumed en masse by households. Their price has increased by an average of 40% during this period. As mentioned, this applies to manufacturers of both high-end and low-end models.
 
Yet the electric vehicles of the early part of the decade were small, designed for car-sharing (like Autolib, the very example of the anti-premium vehicle). The significant technological progress made over the last ten years, particularly on batteries, has nevertheless been used to improve the performance of increasingly heavy and cumbersome vehicles, whose price has continued to rise.
 
For Pardi, electrification, at least as it is done today, with the upmarket drift, has several limitations:
- Batteries are built with cobalt and lithium which are rare materials whose extraction is very polluting. By doubling or even tripling the average size of batteries the pressure on the extraction and availability of these materials increases significantly.
- Battery production is energy intensive. Electric vehicles have a carbon debt from the moment they start driving, and this debt increases the heavier, more powerful and longer-range the vehicles are.
- The price of electric vehicles makes it more difficult for them to reach low-income households. However, these vehicles are currently only sold thanks to generous government contributions that go to companies and wealthier households. In the absence of social inclusiveness, the risk of political rejection of the ecological transition becomes greater.
- The countries of Central and Eastern Europe have become major consumers of cars, but they mainly equip themselves with old second-hand vehicles imported from Western countries. They will therefore find it difficult to adapt to the European regulatory framework, even though they have become the main contributors to the growth of CO2 emissions in transport during the years 2000 and 2010.

Discussion
 
Question: important, often neglected, actors in electrification and more broadly in the ecological transition are employee organisations. The production of electric vehicles requires a smaller workforce (-20%). What did the employees' organisations say about the development of environmental regulations? Were there any specific strategies in the face of this forced march towards electrification?

Response from the speaker: Electricity has been promised as the technology that will "protect jobs" in rich countries. However, trade unions are concerned that this will not compensate for the massive shift of production from electric to low-cost segments in low labour cost countries.
At the moment the unions are rather passive on this issue, they do not develop much expertise.
Electric motors are easier to manufacture, so less labour is needed. An electric motor has fewer parts. The loss of 20% of the workforce is to be found in the manufacturers, but also in the equipment manufacturers. In particular, the batteries are real commodities, they are not produced by the manufacturers, but by the equipment manufacturers.
 
Question: Is there a deeper contradiction between the mode of growth and the creation of demand?
 
Response from the speaker: The question of the market is central to the electrification strategy. It is a renewal market, so it is for people who are replacing their cars. We need to attract people who already have a car with more efficient models, hence the move upmarket.
During the thirty glorious years, vehicles were less and less expensive. It was a question of equipping all households, it was a real democratisation of cars. Today, there is a paradigm shift. Manufacturers are targeting households that already have cars and also the richest households.
 
For the speaker, it should not be forgotten that the battery is becoming the strategic component of the vehicle. According to some, the electric vehicle is a battery on wheels. It is a strategic component in terms of weight and cost (the battery costs between 30 and 40% of the price of the vehicle).
 
Electric vehicles were initially very atypical, even if the Renault Zoe electric vehicle was produced on a shared platform. Today, manufacturers are moving towards dedicated platforms to optimise the manufacture of electric vehicles. But this has additional costs. However, they can make these investments profitable by producing large volumes. This assumes a capacity to absorb the market and government subsidies. There are still uncertainties.
 
Question: Will low-cost electric cars, such as the imminent launch of the Dacia Spring, change the situation?

Answer from the speaker: The general rise in the range of the market opens up possibilities for low-cost electrics, which have been abandoned by almost all manufacturers. But given the constraints of autonomy and recharging associated with the EV, a low-cost electric vehicle will still have more difficulty than the rest of the Dacia range in finding its market. Such an EV, like those launched in the early 2010s, would require a paradigm shift, notably from ownership to use, and also a dense recharging network to compensate for the reduced range, but the European regulatory framework does not favour this paradigm shift, and national policies to promote it seem generally ineffective. In contrast, the premium electric vehicle can replace the conventional vehicle without changing the paradigm, and this is the way forward.