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Agora/BCG Study: 15 Million E-Cars Far Off - Hesitation and Tariffs to Blame

Political hesitation and tariffs on imports from China are pushing the 15-million target far out of reach, as Agora Verkehrswende and Boston Consulting Group state in an analysis of the ramp-up of electromobility in Germany. There remains a gap of 6 million e-vehicles under current conditions. Faster progress could be achieved by involving Chinese manufacturers under common rules. The initial costs are high, but the consequential costs are much higher.

Without China, it's not possible: Stellantis is already making a virtue out of necessity and wants to boost the number of electric vehicles with the cost-effective cars from the cooperation with Leapmotor from China. | Photo: Stellantis
Without China, it's not possible: Stellantis is already making a virtue out of necessity and wants to boost the number of electric vehicles with the cost-effective cars from the cooperation with Leapmotor from China. | Photo: Stellantis
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Johannes Reichel

To achieve the goal of 15 million electric cars by 2030, the German automotive industry relies on a package of measures from the federal government and on Chinese manufacturers. With its current course, Germany will miss the target by about 6 million vehicles. This is shown by a study by the Berlin think tank Agora Verkehrswende and the strategy consultancy Boston Consulting Group (BCG), which analyzes the framework conditions for the ramp-up of electromobility in Germany in international competition. Higher import tariffs on electric cars from China would thus lead to higher prices for customers and endanger the competitiveness of the German automotive industry.

"Those who want to achieve climate goals and secure Germany as an automotive location in the long term should advocate for a rapid ramp-up of electromobility involving Chinese companies," says Christian Hochfeld, Director of Agora Verkehrswende.

This may sound paradoxical at first, but a rapid structural change to electromobility also contributes to more sovereignty and competitiveness vis-à-vis China, Hochfeld further argues. The establishment of European value chains for batteries makes Europe less dependent on China's dominant market position. The rapid establishment of Chinese companies in Europe according to common rules creates more value than imports.

"At the same time, this offers the opportunity to catch up on development backlogs in technology areas such as batteries through cooperation. Import tariffs or even a further isolation from China would bring hardly calculable risks for German companies. Especially in the area of low-priced small vehicles, Chinese products can help accelerate the market ramp-up for electric cars in Europe. The federal government and the EU should consider this in the negotiations on import tariffs for electric cars from China," advocates the Agora director.

According to the authors' calculations, in a scenario where the target of 15 million by 2030 can be achieved, Chinese manufacturers will have a market share of 15 percent of the stock of electric cars in Germany. This corresponds to about 2.2 million vehicles, particularly in low-priced segments. An increase in import tariffs in the range of 20 to 40 percentage points, as planned at the European level, would cause Germany to miss its 15-million target by 1.3 to 2.4 million vehicles, even if the federal government simultaneously takes extensive measures to ramp up the market for battery-electric cars.

Activate all political and economic levers

Based on a target achievement scenario, the study shows that the 6-million gap by 2030 can only be closed if all political and economic levers are activated. Economic incentives, such as making electric cars cheaper and combustion vehicles more expensive, are possible through vehicle taxes and company car taxation. The vehicle tax could start with the initial registration and be more closely aligned with CO2 emissions. Regulatory instruments such as quotas for manufacturers and commercial fleets are available to increase the market share of electric cars.

 

Car Tax Reform and Business Quota Would Provide a Significant Boost

In the goal achievement scenario, an example car tax reform and a quota for commercial fleets were modeled. This leads to a total of 4.2 million additional new registrations of electric vehicles by 2030: 1.1 million private and 3.1 million commercial. The faster expansion of charging infrastructure would result in an increase of about 0.3 million electric cars. Comparable effects could also be achieved through other combinations of incentives and regulations, but these packages of measures would not be enough to close the gap. For this, greater involvement of Chinese manufacturers is required. According to the goal achievement scenario, only then could the number of electric cars in Germany be increased by a further 1.5 million to a total of 15 million by 2030.

"To reach the 15-million goal, well-coordinated regulatory initiatives are necessary. The industry needs reliable framework conditions and thus planning security. Punitive tariffs lead to uncertainty among investors, consumers, and manufacturers. The latter should focus on bringing an attractive and internationally competitive range of electric cars to the market," says Kristian Kuhlmann, co-author of the study and partner at BCG.

Securing Employment and Reducing Costs

Regarding employment effects, the goal achievement scenario of the study offers significantly better medium- and long-term prospects – despite major changes due to the transformation. By 2030, the number of jobs in the core automotive industry will decrease by about eight percent compared to today. At the same time, new jobs will be created in adjacent industries, such as battery production, renewable energy, and charging infrastructure. However, this also entails a great need for training and further education. In the event of prolonged reliance on the combustion engine and slower ramp-up of electromobility, significantly higher job losses in the core automotive industry are to be expected in the long term.

High financing needs, but even higher follow-up costs

The study estimates the total economic financing needs to achieve the 15-million goal by 2030 at 45 to 65 billion euros: for additional purchase incentives, compensation for additional costs, and charging infrastructure. Exactly how high the financing needs are and how they are distributed among the state, manufacturers, and consumers strongly depends on the specific design of the package of measures. Without a change in course, significantly higher costs would probably also be incurred beyond 2030: for the loss of market shares and jobs, for declining economic strength and tax revenues, for compensation payments and fines for violations of international climate protection agreements, and for damages due to the consequences of global warming. The example of the automotive industry shows how closely industry and climate policy are now linked. The future is electric – this benefits the climate and the automotive location Germany. But simply talking nicely won't get us to this future, Hochfeld said.

"E-fuels and hydrogen are not a real alternative in the passenger car sector. Lengthy public debates about them are already deterring customers from making the switch. What needs to be done is obvious. We now need the consistent action of all actors. 15 million electric cars by 2030 and climate neutrality by 2045 require a rapid and intensified shift to electromobility. It will never be as cheap as it is today – and it is probably the last chance. What are we waiting for?" Hochfeld asked rhetorically.

Translated automatically from German.
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