Battery cost trends in the European Union and mainland China

• Due to withdrawal of the United Kingdom from the EU, the removal of UK volumes which represent about 15% of overall Europe sales, has a substantial impact on Europe registrations , showing a further drop to 11.2 million units despite prediction of increased sales volumes in this economic recovery.

• The recovery from COVID-19 impact for the European market is expected to continue for a few years, with volumes rising to 11.9 million units in 2023, before stagnating between 11.9 and 12.3 million units up to 2033.

• While in Mainland China, the economic recovery and expansion of the industry are expected to continue during the coming decade, with the sales of passenger cars forecast to go over 30 million units in 2033, representing an annualized average rate of growth of 3.0% from 2020.

For the expanding mainland China market and the stagnating European market, a substantial transformation of the industry is expected during the coming decade. This is primarily related to the acceleration of the electrification of passenger cars, driven by the new energy vehicles (NEV) mandate in mainland China and the gradual tightening of fleet CO₂ regulations imposed on manufacturers in the EU. In Europe, new fleet CO₂ targets to be introduced in 2025 and 2030 are expected to spur a drastic transition toward electrified vehicles. While the combined share of battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) in 2021 is already substantial, at 15.8%, it is expected to reach around half of the market (49.8%) in 2030, while mild hybrid electric vehicles (MHEVs) [34.2% in 2030] partially compensate for the collapse of internal combustion engine (ICE) vehicles (64.1% in 2021 to 1.6% in 2030).

In mainland China, the shift toward electrified powertrain technologies is embodied by the combined share of BEVs and PHEVs increasing from 10.0% in 2021 to just over one-third of the market (36.2%) in 2030. At the same time, the currently ubiquitous ICE vehicles, with and without stop-start system, are expected to plummet from four out of five sales (80.2%) to just one in eight (12.4%) sales, predominantly replaced by MHEVs at 38.9% in 2030.

In both markets, this shift toward low-emission vehicles is enabled by a considerable increase in the number of plug-in models available for sale, as manufacturers gradually expand their product portfolio to offer these vehicles in most of the segments. While mainland China is expected to have a larger number of plug-in models on offer, this is partly due to the size of the market and the wide variety of brands present there. But for both regions, these plug-in models are expected to represent about half of the models for sale by the end of the decade, a testament to the predicted ubiquity of electrified vehicles in the coming years.

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Our Battery cost trends in the European Union and mainland China whitepaper addresses a critical topic of cost parity between BEVs and ICE: stop/start based on a thorough examination of vehicles with various battery capacities and engine configurations. It also discusses the prospects for the European and mainland China markets, focusing on the rate of electrification.

Posted 27 July 2021 by Monika Punshi, Senior Research Analyst, Automotive, IHS Markit and

Rashmi Dhar, Senior Research Analyst, Automotive, IHS Markit and

Xavier Demeulenaere, Principal Research Analyst, Automotive, IHS Markit