IS THE UK'S ICE BAN A GOOD IDEA AND IS IT DOABLE IN 2030? - BERYLLS STRATEGY ADVISORS - is the uk's ice ban a good idea and ...
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BERYLLS STRATEGY ADVISORS IS THE UK’S ICE BAN A GOOD IDEA AND IS IT DOABLE IN 2030?
MANAGEMENT SUMMARY.
1 There is no doubt that strong measures are needed to slow down climate
change – some of them inevitably painful.
2 here is also no doubt that electric vehicles powered by renewable electricity
T
can quite easily reduce climate-impacting emissions – more easily in some
applications than in others.
3 e also see that electric vehicles are gaining increasing traction with car buyers
W
in many global new car markets including the UK.
4 Late in 2020 the UK government has announced a ban of combustion engine
powered cars from 2030 – pulling ahead their original target date
by five years.
5 However, a large uncertainty remains around how fast the transition should
and can happen – and which roles governments need and should play in it.
6 In this article we want to discuss:
- What does this ban really entail? Is it going to be effective?
- And if not, what could or should be done instead?
2
ANOTHER BORIS JOHNSON
PROPAGANDA ACTION? HOW MUCH
SUBSTANCE DOES THE 2030 ICE BAN HAVE?
While noisily announced as a ban of Petrol and Diesel cars from 2030,
the proposed new regulation will allow the sale of vehicles with internal
combustion engines until 2035, if ‘they have the capability to drive a
significant distance with zero emissions (for example, plug-in hybrids or
full hybrids)’. So, in reality, this announcement does not at all constitute
a real and effective ICE ban. And considering that more and more
ICE vehicles are already being ‘hybridised’ by their manufacturers to
achieve better fuel economy and lower CO2 emissions, the ban might
not amount to much after all.
So let’s look at the likely impact of the ban as announced first, but in
a second step, assume a real, strict ICE ban from 2030 and explore its
impact.
A decade or two ago, electric vehicles were clearly understood to be
powered by a battery – and considered a thing of the future. In the
meantime, they have become a thing of today. At the same time, the
language around them has been watered down by terms like ‘electrified’
vehicles. So, it might be helpful to clarify the definitions.
BEV – Battery-electric vehicle PHEV – Plug-in hybrid vehicle HEV – Hybrid-electric vehicle
All energy driving a BEV comes PHEVs can store energy in two A hybrid-electric vehicle is in
through the electric charge port reservoirs: their petrol or diesel essence an ICE car or van since all
and is temporarily stored in the fuel tank and their battery. energy comes on board through
vehicle’s battery. Due to the lack Their tailpipe emissions are fully the fuel tank. Nevertheless, the
of a combustion engine, BEVs controlled by their driver: always hybrid technology does increase
are the only category that cannot charge the battery and always the efficiency of the power train,
create tailpipe emissions. drive in electric mode, your fossil by recuperating braking energy
fuel engine never turns on and into the on-board storage battery.
you emit zero from your exhaust. Depending on the size of this
On the other bookend, never battery HEVs can drive a limited
plug in and you drive an ICE distance on pure electric power
vehicle. PHEVs can be designed – but nevertheless, all of this
in two ways: the more popular electricity was originally created
is in essence an ICE powertrain by burning petrol or diesel in the
with an additional electric motor engine.
(either integrated into the ICE
powerline or driving for example
the rear axle in a FWD vehicle).
The much rarer PHEV variety is
a ‘range extender’ car, which is
designed as a BEV, but carries an
on-board ICE generator to charge
its battery when no external
electricity source is available. 3
THE UK 2030 ‘ICE BAN’
AS ANNOUNCED
It is certainly impossible to forecast accurately how the powertrain
mix will play out but we can take a good guess. More numerous, more
attractive, and more affordable models in combination with government
incentives will drive up the share of BEVs in new car sales in this decade.
PHEVs will also grow as they are a useful transition solution for many
drivers and do benefit from some government incentives.
THE UK 2030 ‘ICE BAN’HEVs
However, AS willANNOUNCED
see the fastest growth, simply because many OEMs
However, HEVs will see the will (have
fastest to) ‘electrify’
growth, theirmany
simply because ICE OEMs
engines to reduce
will (have theirtheir
to) ‘electrify’ fleet
ICEemissions.
engines to reduce
THE UK 2030 their‘ICE BAN’Including
fleet emissions. AS ANNOUNCED
Including theICEstrict
the strict ICE ban for
ban announced announced
2035 the UKfor new2035 themix
car sales UK new
could car like
evolve sales
this:
However, HEVs will see the fastest growth, mix could evolve like this:
simply because many OEMs will (have to) ‘electrify’ their ICE engines to reduce
THE UK 2030
their‘ICE BAN’Including
fleet emissions. AS ANNOUNCED
the strict ICE ban announced for 2035 the UK new car sales mix could evolve like this:
100%
95%
3% 4%
6% 8%
10%
However, HEVs will see the fastest growth, simply because many OEMs will (have to) 8% ‘electrify’
4% their ICE
13% engines to reduce
16%
90% 19%
their fleet emissions. Including the strict ICE
100% ban announced for 2035 the UK new car sales5%
mix 6%could evolve like this:
23%
26%
BEV 95%
3%85% 4% 6% 8% 29% 30%
10% 8%
Battery 8% 13%
4% 18% 16%
Electric Vehicle 90% 80% 19% 9%
100% 5% 23% 43%
21% 26%
BEV 95%
3%85% 4% 6% 75%
8%
10%
6% 10%
29% 30% 51%
Battery 8% 13% 8% 11% 56%
4% 70% 18% 16% 25% 59%
Electric Vehicle 80% 19% 9% 61%
90% 5% 12%
43%
23%
21% 29%
BEV 85% 75% HEV 65% 6% 26% 10%
29%
12%
51% 13%
30%
Battery Hybrid Electric 8% 11% 56%
70% Vehicle 18% 60% 25% 32% 59%
Electric Vehicle 80% 9% 61%
43%12%
55%
21%
75% PHEV
HEV 65% 10% 29%
51%12%
35%
13%
100%
100%
Plug-in Hybrid
Hybrid Electric 60% 50% 25% 97% 11% 56% 15%
70%
Electric Vehicle 97% 95% 32% 59%
38% 61%
Vehicle 94% 12%
55% 45% 90%
29%
HEV
PHEV 65% 12%35% 40%
Pure ICE 13% 17%
100%
100%
Hybrid
Plug-in Electric
Hybrid 50% 40%
60% 15% 41%
Vehicle
Electric Vehicle Internal 97% 97% 95% 32% 38%
73% 42%
Combustion
45% 35% 94% 19%
55% 90% 66%
PHEV Engine 35% 40%
Pure
50%ICE
30% 17% 22%
100%
100%
Plug-in Hybrid 40% 59%
15%
Internal 97% 97% 38% 41% 25%
Electric Vehicle 95% 25% 73% 51% 42%
Combustion
45% 35% 94% 19%
90% 66%
Engine 40% 43% 42%
20%
Pure ICE 40% 30% 59% 17%
36% 22%
Internal 41% 32%
25%
25% 73% 15% 51% 42% 29%
Combustion 35% 19% 25%
66%
10% 43% 23%
42%
Engine 20% 17% 19%
30% 59% 22% 15%
36% 14%
15% 5% 25%32%
25% 51% 29%
25%
10% 0% 43% 42%23%
20% 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 17%
2025 2026 2027 2028 2029 19%
2030 2031 2032 2033 2034 2035 …
36% 15% 14%
15% 5% 32%
29%
23% 25%
10% 0%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 17%
2025 2026 2027 2028 2029 19%
2030 2031 2032 2033 2034 2035 …
15% 14%
5%
0%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 …
As announced, the 2030 ICE Ban has only a minor impact, giving a nudge
to an already ongoing steady trend and taking the last remaining non-
electrified ICE engines off the market. The real step change will still
happen only in 2035, when no ICE engines can be registered any longer,
forcing the remaining ICE fans to move to BEV.
Each one of these cut-off dates will put manufacturers into a challenging
situation: as always when something becomes unavailable, a number of
consumers will want to secure one of the last ICE cars. Manufacturers
will want to maximise their ICE sales in this final run before the cut-off
– but certainly avoid getting stuck with unsalable inventory after the
deadline. Due to the UK’s right-hand drive, these cars would not find an
alternative market anywhere close by. We can therefore expect a fair
number of December 2029 dealer registrations among those brands
that forecasted the demand incorrectly.
But those are minor practical aspects – importantly, in summary Boris
Johnson’s ‘2030 ICE Ban’ looks more like political propaganda than a
decisive step change to slow down climate change.
4
Although almost academic at this time, the impact of a real ICE ban
THE UK 2030 ‘ICE by 2030 BAN’ seems ASa lotANNOUNCED
more interesting. It would rule out ANY vehicle
However, HEVs will see the fastest growth, simply because many OEMs will (have to) ‘electrify’ their ICE engines to reduce
powered by a combustion engine (including PHEVs and range
THE UK 2030 their‘ICE BAN’extenders)
fleet emissions. AS ANNOUNCED
Including the strict ICE ban announced for 2035 the UK new car sales mix could evolve like this:
being sold in the UK as a new vehicle from 2030 – and its
THE UK 2030
The ‘ICE
impact ofBAN’
a real ICEAS
ban byANNOUNCED
2030 seems a lot more interesting. It would rule out ANY vehicle powered by a
impact on the industry could look like in the graphic below.
combustion engine (including PHEVs and range extenders) being sold in the UK as a new vehicle from 2030
100%
3% 6% 8%
However, HEVs will see the fastest growth, simply because95%many OEMs will (have
4%
to) ‘electrify’
8% 4%
their
10% ICE engines to reduce
13%
16%
their fleet emissions. Including the strict 100%
ICE ban announced for 2035 the UK new car sales5%
90% mix could evolve like
19%
this:
23%
26%
BEV 85%
3% 6%
6%
29% 30%
Battery 95% 4% 8% 8%
8% 18%12%
80% 4% 15%
100% Electric Vehicle 90% 20%
9% 43%
6% 75% 5% 21% 24%
3% 10%
BEV 95% 85% 4% 8%
10%
13% 7% 29% 51%
8% 4% 70% 25% 11% 33% 56%
Battery 16% 18% 59%
90% 80% 5% 19% 9% 38% 39% 61%
Electric Vehicle 23% 12%
26%
BEV 85% 75% HEV 65% 6%
22% 29%
29%
30% 10% 12%
13%
Battery 8%
Hybrid Electric 18% 60%
Electric Vehicle 80% 70% Vehicle 9% 32%
11%
26% 43%
21%
55% 10%
75% PHEV
HEV 65% 51% 35%12%
100%
Plug-in
Hybrid Hybrid
Electric 50% 25% 11% 56% 15%
70% 60% 97% 31% 59%13% 61%
Vehicle
Electric Vehicle 97% 95% 12% 38%
94%
55% 45% 29% 90% 14%
HEV
PHEV 65% 12%
13% 35% 40% 14%
Pure
50%ICE
17%
100%
100%
Hybrid
Plug-inElectric
Hybrid 60% 40%
Vehicle 97% 97% 95%
32% 41%
Electric Vehicle Internal 94% 73% 42%
45%
Combustion 35% 90% 37% 19%
55%
PHEV Engine 35% 66%
Pure
50%ICE
100%
100%
Plug-in Hybrid 40% 30% 59% 39% 22%
15%
Electric Vehicle Internal 97% 97% 95% 73% 38% 25%
Combustion
45% 35% 94% 25% 51%
90% 39%
Engine 64% 40% 43% 42%
Pure ICE 40%
30% 20%
55%
17%
36%
39%
38%
Internal 41% 32%
25% 73% 15% 42%
Combustion 35%
45% 19% 29% 25%
66% 23%
Engine 20% 10%
30% 59% 36% 22% 17% 19%
15% 14%
15% 5% 25%
25% 51% 27%
10% 0% 43% 42% 20%
20%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 14%
2027 2028 2029 2030 2031 2032 2033 2034 2035
5% 36% 10%
32% 9%
15% 29%
0% 25%
10% 2015 2016 2017 2018 2019 2020 2021 23%
2022 2023 2024 2025 2026 2027 2028 2029 2030 …
17% 19%
15% 14%
5%
0%
2015 2016 2017 2018 2019
Just
2020
to highlight
2021 2022 2023
the 2026
2024 2025
main difference:
2027 2028 2029
our2032simulation
2030 2031 2033 2034 2035
of… the UK’s
announced ‘ban’ shows still over 50% of new car sales in 2030 powered
by electrified ICE powertrains while under a full ban this share would
have to fall to zero. From a climate change perspective such a strict ban
would certainly be preferable – but could it be done in reality for a large
country like the UK? Here is what it would take, respectively cause.
CHARGING
INFRASTRUCTURE
A key aspect is certainly the charging infrastructure needed to keep the
BEVs moving. Under a strict ban we foresee 11.4 million plug-in cars on
the road in 2030, increasing to 23.6 million by 2035. These numbers
are almost 30% higher than under Boris Johnson’s propaganda ban,
driving up the need for charging stations to over half a million in 2030,
requiring the UK to add almost 50,000 charging points every single
year throughout the 2020s – starting from less than 40,000 installed
as of January 2021. With only BEVs being added to the UK car parc from
2030 the required number of chargers would grow to over 1 million by
2035 under the ‘strict ban’ – requiring the new installations to double
to over 100,000 per year for the period between 2030 and 2035.
Even assuming a decreasing cost per charger this results in a large
investment task in the billions of pounds. Shifting installations to rapid
and ultra-rapid chargers will reduce the number needed, but at a
higher cost for each of them. Their usage will also require more EVs to
be equipped with rapid charging capabilities (>50kW).
5
FUEL TAX LOSSES
A shift away from oil-based fuels will naturally curtail the government
revenue from fuel tax. Nowadays every ICE vehicle generates on
average £350 fuel tax per year.
Our hypothetical full ICE ban would double the annual revenue
reduction compared to the announced ban – to £3.6bn in 2030 and
increase it by 30% to £11.3bn in 2035. The government would certainly
have to find offsets for those lost tax takings, which come on top of the
subsidies an accelerated switch to EVs requires to attract consumers
to those vehicles and support the required investments in charging
infrastructure. A proportionate taxation of electricity would ‘do the job’
but counteract the efforts to make EVs more attractive to consumers.
ELECTRICITY SUPPLY
Any acceleration of the EV penetration raises the question if there will
be sufficient generating capacity to supply all these EVs with electricity
at the charging points? Surprisingly or not, we do not really see a large
risk here – even in 2035 the electricity needed by all EVs on the roads
will amount to less than 20% of today’s electricity demand.
This means there will be sufficient generating capacity, as long as smart
charging can help to flatten the demand peaks. Outside those peak
periods there will be enough currently unused generating capacity
to supply the kWhs required to refill the BEV batteries, in particular
since the foreseeable increased renewable mix will further increase
‘overcapacity’ in the windy night hours. Smart meters with reduced off-
peak prices and programmable EV chargers will be needed to channel
the demand away from the traditional morning and evening peaks.
6MODEL
PORTFOLIOS
One reason for EVs taking off rather slowly is undisputed: the small
initial offering. For several years EV buyers had to choose between
a Tesla or a Nissan Leaf. The offering has been growing steadily
since then, as more and more brands add PHEVs and BEVs to
their line-ups. But what would a strict ICE ban in 2030 really mean
for the model portfolios? Considering that car models are usually
being sold over up to eight years and often have up to five years
lead time, the portfolios of 2030 are today already partially decided
in the strategic plans of the car makers. Will there be enough EVs
to give car buyers the level of choice they are used to today from
ICE cars?
Subtracting c. 70 high-end models that together only make up 2% of
UK new car sales, some 180 models make up todays new car offering.
The Top 20 models cover c. 30% of the market with average annual
sales of 30,000 units. Even the Top 5 sellers find only between 40,000
and 50,000 UK buyers every year. Our simulation foresees the BEV
mix in 2029 to be around 40% - requiring the replacement of around
1.2 million new ICE car sales by a pure BEV. Assuming average sales
equivalent to today’s Top 20 of c. 30,000 annual units we would need
40 additional BEV models. This looks rather possible since at least 20
different brands will compete for that volume and most car makers
by now have announced substantial ‘EV model offensives’ in the new
decade. Therefore, we don’t expect a lack of choice to hold back EV
sales in 2030.
THE UK 2020 SALES BREAKDOWN
THE UK 2020 SALES
Considering thatBREAKDOWN
car models are usually being sold over up to eight years and often have up
Considering that car models are usually being sold over up to eight years and often have up to five years lead time, the
portfolios
portfolios of ofalready
2030 are today 2030partially
are today
decided already partially
in the strategic decided
plans of in the strategic plans of
the car makers. the car makers
Volkswagen Tiguan Volkswagen Polo
Nissan Qashqai Mini Mini
Mercedes-Benz A-Class Volkswagen Tiguan Volkswagen Polo
Ford Puma
Ford Transit Custom
1,8% 1,7% 1.4% Nissan BMW 3-Series
Qashqai Mini Mini
Volkswagen Golf 2,1% 1.4% BMW 1-Series
1.4%
Ford Focus 2,1% Mercedes-Benz
1.4% A-Class
1.2%
Kia Sportage Ford Puma
1,8% 1,7%
Mercedes-Benz Sprinter
Ford Transit Custom 1.2% 1.1% BMW 3-Series
Vauxhall Corsa 2,1% 1.4%
Tesla Model 3
Volkswagen Golf 2,1% 1.4%
1.2% 1.1% Toyota Yaris BMW 1-Series
2,5% 1.4%
Ford Kuga
Ford Focus 2,1% 1.4%
1.1% Kia Sportage
Ford Fiesta 1.1% 1.2%
Volvo XC40
Mercedes-Benz
Sprinter
Toyota Aygo
2,6%
2,1% 1.0% 1.2% Tesla Model 3
Vauxhall Corsa 1.0% 1.1%
1.2% Toyota Yaris
1.1%
2,5% 1.1% Ford Kuga
Ford Fiesta Volvo XC40
1.1%
Toyota Aygo
2,6% 1.0%
1.0%
Other
TOTAL
1,940 k cars
(Unit: k cars, %)
Other
TOTAL
1,940 k cars 7
(Unit: k cars, %)CONCLUSIONS
We have clearly seen that the ‘ICE Ban’ as announced by the
UK government last year is not doing much to accelerate the
electrification of the car parc. It fits in quite neatly with the
current trends, driven by existing emissions regulations and
changing consumer preferences, allowing Boris Johnson to free-
ride on existing trends, but not creating a step change in climate-
damaging emissions.
Only a total ICE ban would stop the sale of ICE-powered cars and
cause a step change to emissions - but would such a total ICE ban
from 2030 be at all possible?
We saw above that with a concerted effort of governments, car
makers and infrastructure providers the required conditions
can be created – charging infrastructure (the hardest job of all,
requiring a step up from today’s installation rates), electricity
supply and a sufficiently broad product offering can be created
by 2030.
This leaves two remaining hurdles: the readiness of consumers
and who will pay the bill for it all.
A binding and strict law – our ‘strict ICE ban’ discussed above –
will automatically take care of the first. Consumers will have no
choice and will buy BEVs from 2030 if other vehicles are no longer
available, after an inevitable rush to secure ‘the last ICE car’ in
2029 and the demand hangover resulting from this for 2030.
The latter will require collaborative burden sharing between all
involved parties, including consumers who will have to pay a bit
more for their car (or downsize accordingly to keep the price the
same). Infrastructure providers will have to invest with a longer
than normal payback period. Local and the national governments
will have to work together to create, fund, and operate practical
schemes that catalyze infrastructure development for and
adoption of BEVs in the run-up to the 2030 cut-off, for example to
provide home and workplace charging for the millions. However,
this investment should be justified to avoid the potentially huge
cost of out-of-control climate change.
So, a total ICE ban from 2030 could be done – and we are wondering
why Boris Johnson’s government is not more courageous and
implements such a total ICE ban. Could there be doubts that EVs
are truly the best solution to reduce traffic emissions? Maybe a
question to be discussed in a future article…
8BERYLLS STRATEGY ADVISORS
YOUR CONTACT
Berylls Strategy Advisors is a top management consulting firm
specialized in the automotive industry, with offices in Detroit, in Munich
and Berlin, in China, in Great Britain, in South Korea and in Switzerland.
Our strategy advisors and associated expert network collaborate with
automotive manufacturers, automotive suppliers, engineering services
providers, outfitters and investors to find answers to the automotive
industry’s key challenges. Our main focus is on innovation and growth
strategies, support for mergers and acquisitions, organizational
development and transformation and profit improvement measures
across the entire value chain. In addition, together with our clients,
experts at Berylls Digital Ventures develop solutions for digitizing and
transforming the business models of OEMs, suppliers, engineering
services providers and mobility providers. Longstanding experience,
well-founded knowledge, innovative solutions, as well as an
entrepreneurial mindset distinguish Berylls consulting teams. Through
partnerships with experts, Berylls can draw on in-depth technology
expertise, a comprehensive understanding of the market, and powerful
networks in order to develop workable solutions.
YOUR CONTACT PERSON
Arthur Kipferler
PARTNER
arthur.kipferler@berylls.com
T +44 73 8080 1960 | info@berylls.com
9Berylls Strategy Advisors Ltd. 8 St James’s Square | London, SW1Y 4JU | T +44 73 8080 1960 | info@berylls.com | www.berylls.com
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