While electric vehicles (EVs) are clearly dominant, internal combustion engines (ICEs) will remain on sale for at least the next two decades and will continue to require performance improvements to meet ever more stringent emissions regulations. Like their customers, large component suppliers have intricate investment and capital allocation decisions to make going forward.

Listed below are the key regulatory trends impacting the EV theme, as identified by GlobalData.

Agreements to ban combustion-powered cars’ sales

Another trend driving the adoption of electric vehicles is the decisions taken by numerous governments worldwide to set a point for the phase out of combustion-powered vehicles.

In the UK, for example, the government confirmed in November 2020 that it would outlaw the sale of new non-plug-in vehicles by 2030, and plug-in hybrids by 2035. It is hoped that, by that point, there will be enough affordable EV options for buyers with smaller budgets because concerns have been raised that EVs are generally more expensive to buy than combustion-powered cars and could price some buyers out of the market.

In the US, California leads the way in emissions policy with its Corporate Average Fuel Economy (CAFÉ) standards. The state announced in September 2020 that it would outlaw the sale of all non-zero-emissions vehicles by 2035, making it the first US state to do so. Thirteen other states generally use the same rules as California.

Sweden also confirmed that it would ban the sale of fossil-fuel cars by 2030 while Norway, a significant European EV market, confirmed it would ban the sale of petrol cars by 2025. Austria, France, Iceland, Germany, Spain, and Thailand are among other nations also confirming the end of combustion car sales with targets varying between 2035 and 2040.

Drive to lower CO2 emissions

Over the past 20 years, the focus of automotive environmental targets has shifted from exhaust pollutants – NOX, particulates and hydrocarbons – to reducing greenhouse gases (GHGs), with the most significant being CO2. The shift was precipitated in 1997 when the Kyoto protocol climate change agreement was signed obliging rich countries to reduce CO2 emissions by an average of 8% per year up to 2012.

Within Europe, some 19% of CO2 emissions were attributable to road transportation at the time. Further, CO2 emissions from transportation had risen by 32% since 1990. The targeting of CO2 from vehicles is part of the European Commission’s overriding objective to reduce carbon emissions by 80% by 2050 compared with 1990, with milestones such as a 20% reduction by 2020 and a 40% reduction by 2040 set.

In the hope of preventing the imposition of legislation, the members of the European automotive manufacturers’ association (Acea ), together with their Korean (KAMA ) and Japanese (JAMA ) counterparts, voluntarily committed themselves in 1998 to reduce fleet CO2 emissions for new passenger cars to 140g/km by 2008 for ACEA members and 2009 for those of KAMA and JAMA. However, despite the agreement, the ACEA agreement saw the automakers fall short of their targets – in 2004 average CO2 emissions had fallen to only 161g/km – prompting the intervention of the European Commission in 2006.

New legislation was announced with the objective of reducing CO2 emissions from passenger cars to 120g/km by 2012, with some leeway to 130g/km if automakers were seen to be introducing other technological measures such as improved air-conditioning systems, the fitting of tire pressure monitoring systems and adoption of gear-shift indicators.

Since Europe’s first moves to limit fleet CO2 emissions, a number of other countries have followed. Europe’s CO2 regulations are the most stringent currently, and the 59g/km CO2 target for 2030 will require significant electrification of the fleets to be achievable.

This is an edited extract from the Electric Vehicles (EV) in Defense – Thematic Research report produced by GlobalData Thematic Research.