Can EVs Go the Distance? EU Approves 3 Billion Battery Development Fund

The European Union has approved a 3.2 billion-euro fund to promote the research and development of battery technology, with cash pouring in from Belgium, Finland, France, Germany, Italy, Poland and Sweden. While Brussels has been on an electrification push ever since Europe fell out of love with diesel, now may not be the best time to double down on EVs.

We recently covered China’s ailing automotive market, noting the poor performance of new energy vehicles (which fell by at least 40 percent vs the previous November). We’ve also covered a survey showing how eager the nation’s consumer base appeared to be to purchase them, with both writer and readership wondering how reliable those figures actually were. Our collective dubiousness appears to have been valid. Despite being the top region for EV sales, new data from Bernstein Research claims about 70 percent of the 1.2 million electric or gasoline-electric hybrid models sold in China over the past year went directly to government or corporate fleets. When the government started removing subsidies, sales plummeted with little private interest to soften the impact.

Europe may be on a vaguely similar path. While worldwide EV sales are up about 13 percent through October, sales in North America are down 2 percent (at 301,000 deliveries), with Europe rising 37 percent (to 395,000). That’s partially due to European cities being closer together (with more charging points between them), though most EU member states also offer various electric vehicle purchasing incentives and tax exemptions. They’ve likewise adopted stricter environmental rules that make EVs more appetizing to own in the future.

While recession fears abound, Europe doesn’t appear to be suffering on the same level as China. Still, signs of big trouble looming over the horizon exist. Economic growth has almost ground to a halt, unemployment is creeping up, profit margins are shrinking, and people are coming out in droves to protest various governments. The one bright spot appears to be the burgeoning new energy field and the automotive industry’s transformation into a cadre of electric-focused mobility firms. Yet it almost feels like a distraction from the real problem.

Despite countless reports on how EVs will change the world and surveys claiming to show how interested consumers are, few are actually buying them. Electric cars (including plug-in hybrids) still account for just 2.1 percent of global auto sales, yet they’re somehow supposed to break even with internal combustion models by 2025. At least, that used to be the prevailing assumption; more recent estimates are all over the place. We’ve seen oil companies going no higher than 32 percent EV market saturation by 2040, with electrically minded manufacturers suggesting closer to 50 percent by 2030. Those are both exceedingly optimistic for the respective groups.

Meanwhile, manufacturers are cutting thousands of jobs in order to free up more cash for new technologies. Considering the above, you might be asking yourself why they’d even bother.

Many have suggested true EV competitiveness is just one major battery advancement away. Cheaper energy storage with better range and a superior shelf life is widely believed to be the key toward supplanting internal combustion vehicles, but such an advancement probably won’t bring back those missing jobs. People are starting to get upset.

Germany’s largest labor union, IG Metall, expressed caution on advancing “electromobility” at the expensive of jobs back in 2015. Last year, it began estimating the number of positions that will be lost.

“By 2030 every second job in passenger car powertrain will be impacted directly or indirectly by electromobility,” IG Metall’s chief, Joerg Hofmann, said in reference to a 2018 study using data provided by Daimler, BMW, Volkswagen, Bosch and Schaeffler. “Politicians and industry now need to develop strategies to manage this transformation.”

Maybe that’s what the EU is attempting to do. According to the Financial Times, the European Union expects the €3 billion battery investment deal to lead to an additional €5 billion in private investment through 2031.

From FT:

Margrethe Vestager, executive vice-president in charge of promoting technology in Europe and competition commissioner, said: “Battery production in Europe is of strategic interest for our economy and society because of its potential in terms of clean mobility and energy, job creation, sustainability and competitiveness.”

She added: “The approved aid will ensure that this important project can go ahead without unduly distorting competition.”

Maroš Šefčovič, vice-president for interinstitutional relations and foresight, said: “Thanks to intensive efforts by seven member states, industry and the commission, Europe’s first major pan-European battery ecosystem is emerging, with lead projects in all segments of this strategic value chain.”

As you might have noticed from the abundance of buzz terms, those quotes are largely meaningless. But Europe has to do something, as its manufacturers, member states, and labor unions are all messily tangled together while the EU is pushing staunch environmental reforms. This is where Europe matches China the closest and gives us the most reason to worry.

Chinese automakers have even deeper ties with the government; they basically have to assemble EVs or suffer the consequences of failing to adhere to mandatory sales quotas. At the same time, its citizens are losing their purchasing power. We’ve already seen this negatively impact electric vehicle sales, which continue to cost far more than similarly equipped gasoline-burning cars, after subsidies were cut. This has left countless EV startups to wither on the vine after China did its utmost to ensure hundreds came into existence.

The United Kingdom also started cutting subsidies this year, causing EV sales to drop rather swiftly. The Society of Motor Manufacturers and Traders (SMMT) immediately blamed a lack of government support for the negative growth.

“Another month of decline is worrying but the fact that sales of alternatively fueled cars are going into reverse is a grave concern. Manufacturers have invested billions to bring these vehicles to market, but their efforts are now being undermined by confusing policies and the premature removal of purchase incentives,” said SMMT CEO Mike Hawes over the summer.

“If we are to see widespread uptake of these vehicles, which are an essential part of a smooth transition to zero-emission transport, we need world-class, long-term incentives and substantial investment in infrastructure.”

Unfortunately, the UK has basically said it cannot continue supporting the transition to EVs through incentives without dipping into its emergency funds.

Here’s the bottom line. Automakers the world over are killing jobs because they don’t need the same production capacities that they used to. The global auto market is cooling off and factories still have to contend with adhering to stringent emission rules and fines — while also turning a profit. Repositioning product goals appears to be the industry’s preferred solution, but running into the arms of electromobility has proven itself to be cripplingly expensive and may not be sustainable for every manufacturer to try and tackle. Despite strong governmental and societal pressures, consumers just aren’t playing along. And if something doesn’t change soon, we’re going to have huge companies going bankrupt because they’ve sunk their savings into developing products and services no one wanted.

Worse yet, there’s no obvious Plan B. Regulatory mandates basically force automakers to transition to EVs over the next decade, but technological gaps continue making them a financial black hole.

[Image: RossHelen/Shutterstock]