The end of thermal vehicles in 2035: the great leap into the unknown

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It was in the making and every week that passes confirms it: by committing to carbon neutrality by 2050, the EU had signed the death warrant for the thermal vehicle before 2040 and it was clear that the -37.5% agreed in 2018 for the CAFE 2030 would not be enough. With the new commission and the green deal, things are moving fast and we will have confirmation on 14 July. Politicians like Pascal Canfin are trying to convince us that everything is going to be fine and that the horizon that is emerging is desirable. While their arguments are understandable, they are overlooking a number of crucial questions that will arise very quickly.

 Although we do not know whether the Elysée has decided in favour of the position defended by the Ministries of Transport and Ecological Transition, which are in favour of revising the French objective of the last thermal vehicle emissions (including hybrids) by 2035 rather than 2040, it seems that the European consensus is becoming clearer and that we should prepare ourselves for the fact that on 14 July, one of the 13 directives adopted will set out this new course.
 
As Pascal Canfin pointed out in the interview he gave last week on this subject, this would already be a compromise solution between the States for which the car is only a market and which are ready to move towards this prohibition from 2030 and those for which the car is also an industry, of which France is still a part. 
However, as Pascal Canfin himself points out in the report he signed and published by Terra Nova on 15 June, what is happening is the logical and predictable consequence of the fact that the EU adopted the 2050 climate neutrality objective in 2019. Putting the issue into the broader perspective he calls the "new progressive age of globalisation" (the title of his report), he writes on this: 
 
"This is a new industrial revolution, that of the zero-carbon economy, in which, as with previous ones, the trends at work are common to all industrialised countries. Europe pulled́ first by adopting in 2019 the goal of climate neutrality for 2050, followed by the United States in 2021, Japan and South Korea in October 2020 and China in September 2020, which has set this goal for 2060 in line with the Paris Agreement. The rules of the game are changing as a result: Europe is embarking on a Green Deal that will require more than fifty European laws to be changed between 2020 and 2022 - a carbon price of 50/60 euros per tonne of CO2 leading in particular to an accelerated phase-out of coal, the end of the marketing of petrol and diesel cars in the decade 2030-2040 to be totally replaced by electric cars.
 
In the perspective he outlines, what is emerging on the automotive issue as on many others - including energy and food - is a clear break with the three decades of liberal globalisation that began with the arrival of Thatcher and Reagan in power in 1979.
 
The 2008 crisis would have put an end to this, but it would have taken another 10 years for the alternative to take shape, which is taking shape today with the Green Deal, which owes a great deal to ecological awareness on the one hand, and to the changes in monetary and budgetary policies opened up by the "quantitative easing" decided by Mario Draghi to deal with the sovereign debt crisis by saving the euro. With the Covid crisis managed by finally clearly renouncing the straitjacket of the Stability and Growth Pact, the new age can, according to him, take shape and be supported by strong and coordinated national and European public intervention. The electrification dossier is a piece of this puzzle and must be managed as such.
 
Even if, as D. Seux writes, this is only the point of view of "the left wing of Macronism", it is likely that P. Canfin is not too wrong when he, who chairs the European Parliament's environment committee, claims that Europe "is already and increasingly the standard bearer of this model". Stimulated by Biden's victory in the United States and embodied by the new Commission, this shift is indeed taking shape and, because France is due to take over the Presidency in January 2022, among other things, it is highly likely that whatever fits in with these orientations will win the Elysian arbitrations.
 

In the car industry, this will mean that, in 14 years, the market and production will have to change very radically on a basis that is certainly becoming clearer but is currently extremely narrow: battery electric vehicles (BEVs) will still account for just over 7% of sales of private cars in 2021 (120,000 in a full year) and 2.2% of sales of commercial vehicles (10,000). Their production in France is not nil since the Zoé, and the electric versions of the Kangoo, Smart for Two, DS3 and Opel Mokka are assembled in France, but most of the assembly (95%) does not concern BEVs. Moreover, industrially, France is marked by a relative specialisation in LCVs (due to the choices made by Renault in particular) and mechanical factories, which makes this change particularly violent and the foreseeable social damage very extensive.

 
Pascal Canfin seems to be aware of this and claims that manufacturers and Tier 1 equipment suppliers are already ready for it and that if they are not and/or must suffer financially, it is basically their problem. He states in this regard: 
 
"If within this industry, some are behind or some have taken over companies that are behind, that is not our problem. It will be their responsibility, to their shareholders."
 
This is a bit short-sighted insofar as one cannot confuse the fact that manufacturers and equipment suppliers can meet the objective that will be set for them with the idea that this could be done without social impacts in their perimeter. Above all, as the Member of Parliament recognises, the path of reconversion will not always be open, especially in the more specialised SMEs.
 
The proposals are then to use the famous "budgetary margins of manoeuvre" as an ointment:
"When we create this new standard, we will have to set up a transition fund specific to the automotive sector, as we did for the energy sector. This is the condition for success. The automotive industry is the largest industry in terms of employment in Europe. It is an industrial reality in many territories and it is legitimate to set up a fair fund for the automotive industry in conjunction with the States, defined on the basis of objective criteria such as the rate of employment in the GDP.
 
In this game, countries such as the Czech Republic, Slovakia or Romania, which have put the car industry at the heart of their economic development strategy with their entry into the EU and which find themselves highly specialised in this industry because they have benefited from the strategies of massive relocation of production from high-wage countries, would be the designated darlings of an industrial farce to which they would have been invited for 15 years in order to be better able to be wiped off the map later.
 
They could count on significant European subsidies via these 'fair funds' and avoid, by mobilising them, the desire to use electrification as a tool for relocating assemblies, which may arise in France or Italy.
 
In this intra-European perspective, which was not dealt with much by P. Canfin in his interview or in his report for Terra Nova, it will become urgent that the "question of the parks" is not only asked for Germany, Norway or France, but on a European scale.
 
In fact, what justifies the acceleration that is taking shape on the normative level is the objective of carbon neutrality of the fleets in circulation by 2050: since vehicles are lasting longer and longer and the average age of scrapping is constantly rising, and is now flirting with 20 years, we will not make the fleet carbon neutral if we continue to register emitting vehicles after 2035.
 
The reasoning holds and, if we believe the statistics we have for France, we will have to add to this programme very heavy vehicle destruction programmes so that, even if we no longer register a non-electric vehicle after 2035, we will no longer have any emitting vehicles in circulation in 2050: according to the FFA's statistics, of the 41 million vehicles insured by households with their members in 2017, 10.8 million were 15 years old or more and almost 4 million were 20 years old or more.
 

Of course, if these proportions of vehicles over 15 or 20 years old, which are constantly increasing, are no longer taken into account only in France or Germany but also in Poland or Romania, decarbonisation in 2050 will soon look like an objective that will already be difficult to achieve in the countries of Northern Europe but which, as things stand, will be largely out of reach in the "new member states" and probably even in Spain or Italy: the average age of the fleets is higher there and the proportion of the fleet that is renewed annually is lower.

 
Two problems are at stake that are largely neglected. When asked about this issue, P. Canfin simply said that VO would solve the question of purchasing power: "First of all, we have to create the primary market so that the secondary or even tertiary market can exist," he replied. 
 
The first problem here is that the primary market is very small compared to what would be desirable to accelerate renewal and if this is the case it is partly because the forms of vehicle electrification and/or the type of vehicles developed and produced are not the subject of public policies.
 
With the ID3, ID4 and electric Mégane, we are closer to the Tesla way than to the Spring or Ami way, and this is ecologically problematic and can only generate strong tensions between the member countries in the long term. Without the development of much more affordable BEVs and without public policies dedicated to promoting them, thermal neutrality by 2050 seems very unlikely.
 
The second problem concerns capacity. Indeed, from the reasoning we have just used, we can easily deduce that the almost thirty years that separate us from 2050 should logically be years in which we would seek to accelerate the renewal of the fleet, by making electric cars more accessible for example.
 
To prepare for 2050, one could imagine that the decade 2030-2040 would be a decade where various measures would boost light vehicle registrations. The idea of green growth promoted by Canfin and Brussels would fit in well. In such a configuration, Europe would be likely to find itself confronted with serious overcapacity problems fairly quickly. Indeed, when we analyse the behaviour of motorists over the last 30 years, it is very clear that they have taken full advantage of the fact that vehicles age much better to drastically limit their acquisition costs. In France typically, households owned 1.5 times more vehicles in 2019 than they did in 1989, while their expenditure on cars had barely increased in constant euros. 
 
According to most experts, BEVs are likely to age better, or even much better, than internal combustion vehicles because the powertrains are much simpler and the 'gasworks' required for pollution control disappear, and because vibration phenomena are much less. If this were the case, all other things being equal, Europeans could easily have the same fleet to satisfy the same mobility needs by registering far fewer vehicles. This would allow households to use their purchasing power to do other things and would be ecologically virtuous. We must therefore try to anticipate these issues and not rush into a path that could ultimately prove highly problematic.
 
We have been aware of this for several months now, and the decision that is likely to be announced on 14 July will confirm it, the politicians have decided to make all the stakeholders take a leap into the unknown: each of them will have to face obligations for which no convincing answer exists at the moment. P. Canfin and a large part of the European elite do indeed find this desirable, exciting and necessary. This horizon will also have to be made desirable for the employees of industry, the automobile trade, the countries of Central and Eastern Europe, our Moroccan or Turkish 'partners' and, beyond the technical and financial questions, the associated political and geopolitical questions that are opening up make us dizzy.
 
28/06/2021
 
 

The weekly column by Bernard Jullien is also on www.autoactu.com.

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