The End of the Combustion Engine
6 years, 2 months, 29 days, 4 hours
23 April 2023
‘After 137 years, we are seeing the beginnings of the end of ICE vehicles’.
‘The implications are far reaching, impacting individual consumers, renewable and fossil fuel energy providers, global component and vehicle manufacturers, and refuelling and charging infrastructures. Both the opportunities and risks that are presented are game-changing and cannot (and should not) be ignored.’
Powerful words from colleague Nicole de Jager. It references the amended EU regulation made law in April which will require from 2035 that all new cars and vans manufactured or imported into the EU will be zero emission.
Here are my quick thoughts on what we might expect:
Petrol / gas stations become obsolete. Value switches to the providers of home and destination charging. On-route charging is important for long journeys but is a last-resort purchase. Stations are only viable at today's coverage with battery swap instead of consumer-recharge or hydrogen; the former seems already Betamax and the latter is 2 decades away. At some point lots of stations start to close and owners of ICE vehicles find refueling options more remote and inconvenient.
Slow emerging market for recharging vehicles. Main difficulty is the cost of grid infrastructure, which is generally a state controlled or regulated monopoly. Risk that these assets themselves become stranded if hydrogen prevails. Hard to see how anyone except the grid supplier makes serious money, which is why charging infrastructure roll-out is so slow and a headache for governments everywhere.
Second-hand ICE cars can still be bought after 2035, but as we approach 2035 fewer people will buy new ICEs and the average price in the second-hand market will spiral downwards. Social pressure, zero-emission zones, refueling difficulty, restricted and costly ICE car finance and increasingly penal taxes on fuel will increase reluctance of buyers to buy second-hand ICEs. In rich countries the second-hand ICE market will be flooded leading to collapse in prices, a short boom in car recycling and attempts to dump ICE cars in emerging markets. Expect legislative moves to try to limit that, alongside efforts to support the EV transition in emerging markets.
Significant fiscal reforms inevitable in countries where tax on fuel provides a material chunk of government income. Opportunity exists, courtesy of the connected vehicle revolution, to switch to quite sophisticated tax regimes which would charge more for driving at peak times to try to reduce congestion, but so far evidence suggests most governments wary of doing that.
EV batteries remain a concern both in terms of lithium and cobalt supply (availability, social impacts and human rights associated with mining in poor countries) and recycling of the batteries. Either a significant market opens for EV battery recycling or, perhaps, manufacturers decide or are required by law to take back and recycle themselves.