The automakers are gearing up to produce new electric and hydrogen fuel cell vehicles — a byproduct of public policies and market demand.
The Inflation Reduction Act will cut CO2 emissions by 40% from a 2005 baseline, partly provided by the incentives given to EVs and hydrogen cars. Automakers are shifting gears and moving into the fast lane to give consumers what they want. Indeed, Cox Automotive forecasted sales of new EVs in the United States to surpass 1 million cars for the first time this year. Already, they are 7% of new car sales.
Take Toyota Corp.: Currently, 21% of its sales are electric or hybrid cars. The goal is 40% by 2025.
“Zero emissions from our vehicles are the ultimate goal, and we believe the path to getting there is with a portfolio approach – fuel cell vehicles, hybrid vehicles, plug-in hybrid vehicles, and battery electric vehicles,” Toyota says in its sustainability filing. “Offering a range of low-emission vehicles means we should be able to reduce as much CO2 as possible as soon as possible, which in North America means offering more plug-in hybrids and hybrids until the alternative fueling infrastructure for hydrogen fuel cell and all-electric vehicles expands.”
The European Union is phasing out the internal combustion engine by 2040, while the Biden Administration wants half of all U.S.-sold vehicles to run on electricity by 2030. An electrified transport sector goes a long to way to keeping temperature rises in check.
To that end, the Inflation Reduction Act provides a $7,500 tax credit for EVs beginning this year and will last a decade. This benefit had previously gone away if the car manufacturer sold more than 200,000 vehicles. But the credit has some limitations and only applies to less-expensive models.
Electric vehicles comprise 2% of the global car market. The U.S. Energy Information Administration says hybrids that run on electricity and gas will make up 34% of cars in developed countries and 28% in emerging economies by 2050. The Edison Electric Institute projects 26.4 million electric vehicles in 2030.
“Every new vehicle eventually becomes a used vehicle,” said Jonathan Smoke, chief economist of Cox Automotive. “Our data sets indicate used EV sales will begin increasing rapidly from here, following a clear path set by new sales.”
The Future is Here
Ford is also electrifying its cars, including the Mustang, the F-150 truck, and the E-Transit. By 2026, it will produce more than 2 million EVs. By 2030, EVs will represent half of the global volume: two-thirds of European commercial vehicle sales will be all-electric or plug-in hybrid by 2030, and all European commercial vehicles will be zero emission by 2035. It is now investing heavily in EV technology and charging infrastructure and will continue to do so: at least $50 billion into electric cars and battery production between 2022 and 2026.
And last year, Volkswagen said it delivered more EVs worldwide than ever: 369,000 electric cars, a 73% increase from 2020. That includes 106,000 plug-in hybrids that run on both electricity and gasoline.
The goal is the full electrification of the new vehicle fleet. By 2030, at least 70% of all Volkswagen’s European sales will be all-electric vehicles. In North America and China, the share of electric cars in unit sales could reach 50%.
“By significantly exceeding our CO2 targets once again, we have demonstrated our fast and systematic approach to sustainability and the transformation towards e-mobility through our ACCELERATE strategy,” said Volkswagen CEO Ralf Brandstätter. “We are thus making an important contribution to meeting the Paris climate goals.” It is adding to the momentum this year with new models.
But what about hydrogen fuel-cell cars?
Honda, Hyundai, and Toyota are creating fuel cell-powered cars. And BMW is demonstrating those cars that use a Toyota fuel cell. For example, Honda is working with General MotorsGM +1% to develop its fuel cell system, planning to sell 60,000 of those cars by 2030.
Bloomberg New Energy Finance says hydrogen could supply 24% of the world’s energy demands by 2050 while cutting CO2 levels by 34%. It can be done at a reasonable price if favorable public policies are enacted that include putting a price on carbon.
The advantages of hydrogen are that it is abundant, renewable, and non-polluting. Water vapor is the only byproduct of a fuel cell car that runs on hydrogen. And they can run much further than EVs before refueling is required — a process that takes just 10 minutes.
But it is about 30% more expensive to move hydrogen via pipelines than it is to carry natural gas.
Toyota’s Chief Executive Koji Sato believes hydrogen is vital to global net zero goals. Electric vehicles have a head start and the inside track in the sustainable car market. Plus, they have the infrastructure to support continued growth. But global policymakers also recognize hydrogen fuel cell cars for their zero emissions.
“Countries around the world are waking up to the critical role green hydrogen can play in increasing energy security and lowering greenhouse gas emissions. But, until now, it has been too expensive to adopt at scale,” adds Hanna Breunig, with the Lawrence Berkeley National Laboratory’s Sustainable Energy Systems Group.
Change takes time. But it will come to the automotive market, hitting full-swing by mid-century. Automakers are revving their engines, ensuring they get ahead of market and regulatory trends.