Forecasts Predict 24% Electric Vehicle Share in 2025 to Avoid Manufacturer Fines

The market share of electric vehicles will reach 24% in Europe by 2025 because manufacturers will increase sales to meet the EU's decarbonization targets, according to an analysis by the environmental organization T&E.

This organization explains that car manufacturers will face stricter standards next year, following the latest targets set in 2021. Despite some automotive groups requesting more flexible regulations, Transport Environment believes that all can actually meet the CO2 targets set for 2025.

From their perspective, electric cars (BEV) should reach between 20% and 24% market share in 2025, according to a T&E model based on sales from the first half of this year and sales forecasts.

Some manufacturers have asked the EU to activate a special crisis clause to delay their CO2 targets by two years, citing fears of declining electric vehicle sales. However, T&E's main scenario predicts that BEVs will contribute an average of 60% to the CO2 reduction that car manufacturers still need to achieve to meet the EU emissions targets next year. This will be partly due to seven new fully electric models under €25,000 arriving or coming to market in 2024 and 2025.

Although BEVs would be the vehicles contributing the most, Stellantis and the Volkswagen Group are also expected to rely on hybrids (HEV) for 33% and 30% of CO2 reduction respectively that they still need to meet EU targets. This is indicated by T&E's main scenario model based on sales forecasts from market research firm GlobalData. Hybrid sales will also significantly reduce emissions for Mercedes-Benz (17%) and Renault (15%).

Besides their fully electric models, BMW is expected to rely on plug-in hybrids to achieve 18% of the emission reductions needed to meet the EU target for 2025, according to the main scenario.

If manufacturers rely more on hybrid sales to meet the target, the total market share of BEVs would be 20% next year, according to T&E's highest HEV scenario, compared to 24% in the main scenario. In all scenarios, Volvo Cars already meets regulations thanks to its high BEV sales.

For Isabell Büschel, director of T&E in Spain, «2025 will be a great year for Europeans looking for an electric car. BEVs should represent almost a quarter of new cars sold thanks to the abundance of new and more affordable models. But manufacturers' reliance on hybrids, which are reaching their CO2 savings potential limit, is a short-sighted strategy for climate and competing with Chinese BEVs.»

According to the analysis, if car manufacturers continue to struggle, they can «pool» with other manufacturers to further reduce their average emissions. If VW partners with Tesla, only 17% of its sales would need to be BEVs in 2025 (instead of 22%). If Ford partners with Volvo as it did in 2021, BEVs would only need to represent 9% of its sales instead of 21%.

In July, European Commission President Ursula von der Leyen confirmed that the bloc's zero-emission vehicle target will proceed in 2035. T&E calls on national and EU lawmakers to do more to support EV demand with policies aimed at setting corporate fleet targets, master charging plans, and social leasing systems.

According to Isabell Büschel «now is the time for the EU to support electric car adoption by setting electrification targets for company fleets. Governments need to create a stable regulatory environment for EVs with national charging targets and specific buyer incentives.»

T&E has developed a series of scenarios showing different levels of reliance on hybrid vehicles and regulatory flexibility to meet the EU's CO2 targets for 2025.

In T&E's high HEV scenario, it is assumed that all car manufacturers have additional hybrid sales compared to a baseline informed by GlobalData's sales forecast. In T&E's high BEV scenario, all manufacturers would focus on BEVs.

In between, T&E's central compliance scenario is based on tailored models for each car manufacturer. This scenario is based on GlobalData forecasts and published plans by car manufacturers and relies on modeling the necessary BEV and HEV share needed to meet targets assuming all car manufacturers would comply without pooling.

Finally, a fourth scenario assumes that two lagging manufacturers join forces with two leaders.