Combustion car sales to peak in 2020 and fall thereafter – Barclays

Aerial view of electric vehicles at a manufacturing base in China
Source: Imaginechina/REX/Shutterstock

LONDON (ICIS)–Cheaper lithium-ion batteries and consumers’ apprehension about their vehicles’ environmental standards will boost electric vehicles and hit cars with traditional internal combustion engines (ICE), the UK investment bank Barclays said on Thursday.

Analysts at the bank estimate that sales of ICE vehicles will peak in 2020 and decline 2% annually to 2040, adding that the current 52% of diesel cars sold globally could fall to 36% by 2025.

Although lithium-ion batteries are more expensive to produce than traditional batteries, Barclays said the cost has fallen 20% per annum since 2010.

However, it said the cost would “still need to halve” to reach ICE parity adding that lowering costs remains the single biggest challenge for automotive electrification.

“Diesel emits -15% less CO2 than petrol cars so OEMs [original equipment manufacturers] will have to find other ways to comply with fleet emission targets. Car companies need to find a way to cut CO2 emissions but one method is electrification,” said the bank.

“The critical relationship is total cost of ownership compared with CO2 savings. New legislation in Europe requires fleet CO2 emissions to fall to 95g/km by 2021 but there is limited scope to achieve this using today’s technology.”

Barclays said the rollout of electric vehicles will take place more quickly in Europe and China than in the US, although “despite an initial pro-fossil fuel rhetoric” by the newly elected President Donald Trump there is “mounting evidence” that the transition to electric cars is underway.

The automotive industry is a major global consumer of petrochemicals which contributes more than a third of the raw material costs of an average vehicle. ICIS tracks the movement of petrochemical raw material costs in auto production both globally and regionally with the weighted ICIS Basket of Automotive Petrochemicals (IBAP).

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