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Hybrids and battery-powered vehicles will slowly increase their share until 2025, but accelerate as consumer demand rises, a Boston Consulting Group study finds. 

Internal combustion engines will continue to play a major role, but a combination of hybrid and electric powertrains are expected to cut the market share of internal combustion engines by about 50% by 2030, according to research by the Boston Consulting Group.

Technology, regulatory mandates, and consumer cost for both owned and shared cars will shape changeover, the Boston Consulting Group  (BCG) group says. These three factors—technology, regulatory mandates, and consumer cost of ownership—will play out over three phases and about a dozen years.

The growth in car sharing, notably with the advent of autonomous (or self-driving) vehicles, will have a significant impact on the adoption of hybrids and fully electric vehicles. As taxis and shared cars drive significantly more miles each year than personal-use vehicles, the payback in electrification will come much faster, BCG says.

From approximately 2020 to 2025, electrified vehicles—a mix of full hybrids, mild hybrids or 48-volt hybrids, plug-in hybrids, and battery-powered electric vehicles —will increase their share of the market as OEMs are forced to meet tightening fleet-wide efficiency and emissions standards. The adoption of electrified vehicles for shared mobility vehicles will accelerate because their higher mileage will result in a more rapid payback of the investment.

After 2025, falling battery prices and rising consumer demand based will drive sales of all electrified vehicles, and especially battery-powered electric vehicles.

As the transition unfolds, pure ICEs will decline in share from 96% of the global market today to about half of all vehicles around 2030, BCG says.

“The timing of the market’s transition to a new type of powertrain has long been the subject of debate,” said Xavier Mosquet, a BCG senior partner and lead author of the study. “The prospects for electric vehicles are now clarifying, and the transition period from an ICE-dominated marketplace to a market in which electrified vehicles grow share and BEVs start to compete with hybrids and ICEs is about to commence.”

Through 2020, technological improvements in internal combustion engines will enable the industry to meet regulatory emissions requirements in major markets.

The biggest change will be in Europe where diesel engines, which held 48% of the market in 2016, will begin a rapid decline in share to 36% in 2020, BCG says.

Owing to the rising costs of meeting nitrous oxide and nitrous dioxide emissions standards and to “clean” consumer trends, buyers will be encouraged to explore less expensive forms of electrified vehicles.

At the same time, battery costs, which are the single largest driver of total car ownership are declining further and faster than projected just a few years ago. BCG estimates, confirmed by several sources, have batteries’ per-kilowatt-hour cost falling to between $80 and $105 by 2025 and to between $70 and $90 by 2030.

“There will be variations in the pace of change, depending on regulatory actions, consumer adoption of autonomous vehicles and car sharing, and the economics of different fuel sources,” Mosquet said. “Companies will need to develop a suite of strategic and product options to manage a transition that is both inevitable in its destination and uncertain as to its route.”

To view selected highlights from the research, please visit SlideShare at https://on.bcg.com/TippingPoint.

A formal BCG report on the findings, titled The Electric Car Tipping Point, will be published in the coming weeks on the firm’s website, www.bcg.com.


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