The impending weaving of synthetic fuels into EU’s ICE ban policy is a sign of relief for a part of the European automotive establishment. The thought of having to fully transition towards electrification caused shivers to many in this sector, but synthetic fuels can now prolong ICEs indefinitely. Old school sees this as a victory for ICE and a sign that BEVs won’t take over the market as they require a considerable change of habits for consumers.
All that seems good and well but only for those that find comfort in that vision. In reality, things will be a lot more complex than that.
Synthetic fuels come out of green electricity – exactly the same stuff that powers BEVs. The big difference is that the well-to-wheel efficiency of ICEs on synthetic fuels is 82% lower than that of BEVs. That means ICEs will need 82% more green electricity than BEVs in order to cover the same distance. And that, as you’d imagine, will make BEVs a lot cheaper to run. Curiously, hydrogen has exactly the same problem – massively electricity-thirsty – but not has bad as synthetic fuels.
Some would say “but an ICE is much more convenient to use, so people would pay the difference”. Now just imagine the €2/litre you pay today for diesel/petrol goes up to more than triple of that? It might make many drivers to think twice about their ICE…
Economics can make or break powertrain adoption – Henry Ford could tell a lot about that. EVs were actually doing great beginning of last century: they were a lot easier to drive than a petrol car (much different from ICEs you know today) and were not as dirty, smelly and noisy. Hence, more convenient and easier to accept. However, Henry Ford puts an ICE on the market at a fraction of the price – and down went EVs. By 2035 we will see the opposite movie: synthetic fuels will be great for the super rich, but not for the average worker.
Also, adding synthetic fuels to the equation makes everything more complex: it will be extremely naïve to think BEVs, hydrogen and synfuels can all conquer a major share of the market. You just need to look at history (the example of Ford Model T or the growth of diesel in Europe): the choice of fuel is mostly dictated by regulation and economic factors. EU regulation currently puts the three options at the same level, so it’s economics that will decide who wins or loses. And I’ll not even mention how many cities will be keen to close urban centers to ICEs – synfuels make no difference.
And it gets even worse. Synthetic fuels will bring a false sense of security to those automakers and suppliers who don’t really like BEVs. Consequently, they’ll never put major emphasis on BEV development, as carrying on with ICEs is just easier. This is a trap and a deadly mistake. BEVs will command the market in China and in US Tesla will drive BEV adoption beyond CAFE regulation demands. Already today two US states – California and Maryland – have committed to do what EU has refused: to abolish ICE by 2035. And likely more will follow.
Hence, European automakers not heavily invested on BEVs will have difficulties fighting in these markets – even more than what they already have today. On top of that, they will still have to deal with strong EV adoption in Europe anyhow.
So, Elon Musk and other auto leaders with future vision actually have reasons to be happy: they can keep focusing in the future, confident that more legacy competitors will still be living in the past.
The Gartner Blog Network provides an opportunity for Gartner analysts to test ideas and move research forward. Because the content posted by Gartner analysts on this site does not undergo our standard editorial review, all comments or opinions expressed hereunder are those of the individual contributors and do not represent the views of Gartner, Inc. or its management.
Comments are closed