Wednesday, 20 June 2018

Challenges ahead of the automotive industry

EUROBAT FORUM

BRUSSELS

Petr DOLEJSI

Mobility and Sustainability Transport Director - ACEA

ACEA MEMBERS

KEY INDUSTRY FIGURES

12.6 million Europeans work in the automotive sector

3.3 million jobs in automotive manufacturing

€396 billion in tax revenues (EU15)

€50.1 billion in R&D spending, largest private investor

€90 billion positive net trade contribution

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What are the challenges ahead?

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TRENDS REDEFINING THE AUTO INDUSTRY

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People Profit Planet

Demographicchanges

Globalisation versusdecentralisation

Environmentalchallenges

New customer profilesHarmonised standards

versus tailor-made solutionsAir quality & climate change

• Consumer profiles changingo Older versus younger population

o Changing car ownership

• Global population growtho Expected to reach 9 billion by 2050

• Urbanisationo Need for solutions that respond to increased

urbanisation: from 3.5 to 5 billion in 2030!

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People: Demographic changes

WHAT ARE THE CHALLENGES?

People

Profit

Planet

• Cost and profitabilityo €50.1bn invested in automotive R&D annually

o Suppliers offer a range of solutions – but at what price?

o Overcapacity – low profitability in Europe

• Economies of scaleo Finding the right balance between globalisation and

meeting local needs

o Need for globalised standards and regulations

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Profit: Globalisation

WHAT ARE THE CHALLENGES?

People

Profit

Planet

• Climate changeo COP21 - UN aim to limit total warming to 2.0°Co EU aim of 30% GHG reduction by 2030 compared

to 2005 for non-ETS sectorso 60% cut transport sector by 2050 compared to 1990

• Air qualityo Key issue that auto makers seek to addresso Yet, 80% of total air-borne particle emissions are not

related to road transport exhaust emissions

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Planet: Environmental challenges

WHAT ARE THE CHALLENGES?

People

Profit

Planet

• Major trends reshaping mobility and the auto industryo Demographic changes

o Globalisation

o Environmental challenges

• Main drivers of automotive innovationSmart mobility New mobility services Clean mobility

• Creating a cleaner, safer and smarter mobility ecosystem

THE CHALLENGES

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1. Smart mobility

“Drops me off, finds a parking spot and parks on its own”

“Allows me to multi-task and to be productive during my ride”

“Switches to self-driving mode during traffic”

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TOP 3: WHAT CONSUMERS ARE EXPECTING

Source: BCG analysis, consumer survey August 2015

CONNECTIVITY ≠ AUTOMATION

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• Connected vehicle o Not automated

o Communicates (V2V and V2I)

• Automated vehicleo Using internal sensors

o Operates in isolation

o Connectivity not necessary

• Combining automation with connectivity is more effectiveo For example: truck platooning, see-through applications, advanced alerts

on road works or local hazard warnings, automated parking

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SOCIETAL BENEFITSImproved road safety 90% of accidents today occur due to human error

Decarbonisation ITS can reduce CO2 emissions by up to 20%

Increased traffic efficiency Smoother traffic flows will lead to less congestion

Improved access to mobility Elderly and people with disabilities, or those who

live in remote areas such as the country side

Wider economic impact Increased productivity Less waiting time Efficiency gains in transport systems

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SMARTER MEANS SAFER

Connectivity and automation Safer,

more efficient mobility

Intelligent infrastructure

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2. New mobility services

NEW BUSINESS MODELS

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• Offering new mobility solutions, especially in an urban contexto New models of ownership, eg car sharing:

Car2Go, DriveNow, Greenwheels

o On-demand mobility solutions

o Intermodal mobility solutions

o Innovative logistics concept

• Manufacturers are evolving from being ‘just’ producers of vehicles to providers of integrated mobility solutions

• Moving towards “Mobility as a service”

COOPERATION AND DISRUPTION

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• Traditional automotive business models will changeo That’s why our industry has to establish new alliances with

non-automotive partners in the telecom and IT sectors …

o … and develop innovative mobility solutions around new technologies together with other players

• Increasing convergence between sectors

• Disruption will bring great change to our industryo Innovation in connectivity and automation will help to strengthen

the leadership and global competitiveness of the EU auto industry

o Not only competition from other world economies (US, Japanand China), but also non-traditional players (large IT companies)

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3. Clean mobility

THE CHALLENGE

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• Beyond 2021, optimising combustion engine not sufficiento More focus on alternative powertrain technology will be crucial

o Further improvement of CO2 reduction technologies

• Yet, APVs still only represent small share of car sales

• Industry is investing significantly in alternative powertrains

• Market uptake remains low!

5.7%1.4% OF

CAR SALES

COMBUSTION ENGINE

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• So, improving internal combustion engine and diesel technology will continue to play a major role in future CO2 reductionso At least for a (long) transitional period, diesel needed as a bridge technology

• Diesel vehicles emit significantly less CO2 than equivalent petrol-powered vehicles

• Certain segments will be dependent on ICE – role of fuels decarbonisation is essential (heavy-duty vehicle segment)

• RDE-compliant Euro 6 diesel vehicles will continue to be part of wide range of powertrain options needed to reduce CO2

ALTERNATIVE POWERTRAINS

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• Infrastructureo Directive on Alternative Fuel Infrastructure (DAFI) already set clear

objectives for national governments

o Implementation has been poor to date

o Member states and infrastructure providers need to speed up

• Incentiveso Often not sustainable in the long run (Dutch and Danish examples)

o Fiscal and non-fiscal incentives, and especially their monetary value, differ greatly across Europe

o Single European market for APVs does simply not exist today

CO2 regulation post-2020

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5 KEY RECOMMENDATIONS

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1. FOCUS ON 2030 TARGET

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• ACEA welcomes the fact that the date for the newlong-term CO2 target has been set for 2030

• Additional target in 2025 does not leave enough time

o Given long development and production cycles, no time to make necessary technical and design changes – especially for vans

1. FOCUS ON 2030 TARGET

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• Coming just 4 years after the CO2 targets already set for 2021, an interim target in 2025 is overly ambitious

• EU 2030 Climate and Energy Framework

o Adopted by the 28 heads of state back in 2014

o Specifies CO2 reductions for the year 2030 alone

• In line with this timing

o Focus should be on an ambitious, but realistic, 2030 target

o The proposed 2025 target should be revisited

2. SET 20% TARGET FOR CARS

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• EU automobile manufacturers will continue to investin further reducing CO2 emissions from their vehicles

o Already spending a large part of the sector’s €53.8 billion annual R&D investment on decarbonisation

• 30% reduction proposed by the Commission seems to be too ambitious, especially in light of:

o Limited room for further improvement to the combustion engine

o Lack of recharging and refuelling infrastructure for alternative powertrains

o Low market uptake of alternatively-powered vehicles

o Ongoing decline of diesel’s market share

• In the end, it is the consumer who decides which technology to buy

2. SET 20% TARGET FOR CARS

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• These market trends are posing a real threat to future CO2 reductions, even affecting the existing 2021 target

o Moreover, new WLTP test has made 2021 CO2 target >5% more stringent!

• 30% also goes beyond the Climate and Energy Framework

o CO2 targets can indeed provide an impetus for innovation, but the current proposal is very aggressive

o Putting the global competitiveness of the EU auto industry at risk

• 20% reduction by 2030 achievable at a high, but acceptable, cost

o In line with what is expected of other industry sectors

3. INCLUDE CONDITIONALITY

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• Auto industry is ready to go beyond the 20% target

• However, problem is that the Commission’s proposal does not link the proposed CO2 targets to the:

1. Availability of recharging and refuelling infrastructure for alternatively-powered vehicles

2. Market uptake of these vehicles

• Forces car makers to invest in specific technologies without

o Providing clarity on the enabling framework

o Addressing the uncertainty surrounding consumer acceptance

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4. REVISE THE LEV BENCHMARK

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• Commission has also proposed a benchmark system

• Rewarding auto manufacturers that sell a certain share of low-emission vehicles (LEVs)

o At least 15% by 2025 and 30% by 2030

• In principle, this approach is the right way forward and welcomed by EU automobile manufacturers

• Unfortunately, it is not technology-neutral in its current shape, the Commission is effectively pushing for pure battery electric vehicles

• Does not sufficiently reward plug-in hybrids

o Yet, plug-in hybrids play a critical role, especially as large-scale recharging infrastructure is still lacking today

5. ADDRESS SITUATION OF VANS

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• When it comes to CO2, the situation for vans is completely different to that for passenger cars

o Yet, the Commission’s proposal for post-2021 CO2 targetsdeals with cars and vans without much differentiation

• Necessary to treat both vehicle segments differently

1. Set a 2030 ambition level significantly below 20% for vans

2. Enable transfer of credits between segments

3. Allow for weight adjustment of battery-electric vans

4. Adjust the low-emission vehicle benchmark for vans

5. Exclude multi-stage vehicles from CO2 monitoring

6. Promote vans used for passenger transport

Conclusion

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CONCLUSION

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• European automotive industry invests more than €50 billion a year in innovation to address these challenges – we are integral part of the solutions for future

• Main drivers of innovationo Smart mobility

o New mobility services

o Clean mobility

• Key challengeso Affordability of new technology

o Consumer uptake and social acceptance

o Regulatory environment to enable deployment of these new technologies and new perspective for the current ones like the internal combustion engine and fuels

@ACEA_euwww.ACEA.be

THANK YOU FOR YOUR ATTENTION

Source: JRC study, December 2017