Why the VW Scandal is a Game Changer for E-Mobility

Climate change is one the most pressing issues of the 21^st century, and with transportation being one of the largest contributors, it has been a major focus of the European Commission over the past decade. While the e-mobility sector has proven itself as possessing the technology to truly revolutionize transportation into a clean industry, Europe’s focus on incentivising diesel vehicles as the encouraged solution has hindered growth. The recent VW scandal, in which 11 million diesel vehicles were exposed as producing 40 times the amount of harmful Nitrous Oxide in an open road setting than in a testing scenario, has come as a shock to the industry -but is looking like the necessary catalyst to take e-mobility to the next level.

With insights gathered through Venionaire’s recent comprehensive research on e-mobility, this discussion will take a deeper look into the impacts of the recent VW scandal. 

The Conversation of Sustainable Mobility in the EU

Transportation, over the past century, has contributed to the development of society more than almost any other invention – the ability to trade and transport goods defined the 20^th century. However, despite the huge economic success the industry has offered, it has also been one of the largest contributors to global pollution. Mobility alone is currently responsible for a quarter of total greenhouse gases in Europe and as a result, the transition to a more sustainable transportation sector has become a major focus of the European Commission over the past decade. Although historically transportation and sustainability were thought of as two contrasting principles, advances in technology have proven that there are viable solutions to significantly decreasing the environmental impact of mobility. Regulatory bodies throughout the EU have begun to put increasing pressure on car manufacturers to adopt better practices by introducing average fleet targets across Europe. It is clear that over the long-term mobility as a whole is going to face extreme transformation in order to meet the gradual introduction of stringent regulations posed by governments. In addition, shifting demands of increasingly environmentally conscious consumers will further push this change.

However, the current conditions are challenging for car manufacturers who face contrasting challenges: meeting the gradual introduction of these new targets set in place by European regulatory bodies, while trying to overachieve these as little as possible to avoid the significant capital required to introduce new technologies. After all, adopting new technologies is expensive – very expensive. While some outliers such as Tesla and BMW have invested significantly in the development of Electronic Vehicles – a technology truly capable of revolutionising the mobility industry – most car manufacturers have focused on downsizing ICE’s (Internal Combustion Engines) and introducing supposedly ‘clean’ diesel driven passenger vehicles. While majority of car manufacturers see the introduction of Electronic Vehicles as part of their long-term strategies, the main focus over the short-to-medium term remains to be fossil fuel based, as the margins involved in the sale of EVs are significantly lower at this stage. This is attributed to the fact that the additional USP for Electronic Vehicles is relatively lower than the additional cost of producing them, and thus manufacturers are only able to pass on a portion of that additional cost to the consumer.

Before electronic vehicles are realised as the mainstream solution to sustainable transportation, there are some barriers that need to be overcome by both manufacturers and service providers. Firstly, the technology in this sector needs to improve in quality and decrease in price. In the current market, electronic vehicles still underperform in both range and convenience, and considering the price premium, only a niche market are both willing and able to opt for one over conventional vehicles in the current market. Furthermore, the infrastructure is still lacking in this sector. While the provision of charging stations are growing throughout both the United States and Europe, we still need to see considerable expansion before the convenience factor of electronic vehicles is able to compete with that of refuelling traditional vehicles. While experts predict that these hurdles will be able to be overcome – an injection of brainpower, resources and capital is what e-mobility needs to make the leap.

How the VW scandal could act as the catalyst to take e-mobility mainstream

The current emissions-fixing scandal surrounding Volkswagen, the world largest car manufacturer, has fundamentally altered the conversation about the future of sustainable mobility. Last month, the German car manufacturer admitted to cheating in diesel emissions tests by installing software to detect when the engines were undergoing testing and respond altering output of nitrous dioxide (NOx). Volkswagen has acknowledged that the software is likely installed in over 11 million cars, most of which are in Europe. While Volkswagen is undoubtedly guilty, new evidence suggests that they may not be the only offenders and that other car manufactures may also be installing software tricks to deceive emission tests. Following the scandal, the EPA is now committed to determining the extent to which this is an industry-wide problem. Shortly after the information on VW was revealed, the EPA confirmed that a BMW diesel car also yielded significantly different results. Peter Mock, ICCT Europe’s managing director further supported this argument, confirming “all measured data suggests that this is not a VW-specific issue”. With uncertainty at an all-time high, and consumers loosing trust in car manufactures we can expect to see a trend towards consumers demanding more transparency. One Startup gaining attention is The Stigg, which allows users to track the real time emissions data of their vehicles, and compares it to the desired values of the car model.

Until recently, diesel vehicles have been pushed by both European car manufacturers as well as government bodies as a supposedly more sustainable alternative to their gasoline counterpart, in addressing both climate change, reduction of CO₂ emissions and fuel efficiency. ‘Clean’ diesel vehicles were widely seen by the car manufacturing industry as the solution to meeting pending fleet emissions, and have been a popular choice for European consumers. In contrast to other parts of the world, where the sale of diesel passenger cars are very low, diesel sales currently account for 50% of the European car market.

This focus by regulators has resulted in the adaption electric vehicles being slow in the European region.  However, Tesla CEO Elon Musk expressed that the scandal proves the boundaries of fossil fuel vehicles. „We’ve reached our limit of what’s possible with diesel and gasoline. And so, the time, I think, has come to move to a new generation of technology”. The ‘new generation’ of technology being referred to are Electric Vehicles, and industry experts predict that the downfall of diesel passenger vehicles will bring much needed attention to the e-mobility sector – and they are not wrong. In fact, even Volkswagen is planning to capitalize the opportunity their own diesel scandal has presented. In a recent statement they have indicated they will shift focus to developing electric cars in response to the crises.

So what’s next for e-mobility­?

It is without a doubt that this recent event presents great opportunity for the e-mobility sector. The Volkswagen scandal gives further invitation for innovation to disrupt the automobile industry. As in any industry, the timing of business is one of the most influential factors determining success, and the timing couldn’t be better for those eager to disrupt the market the necessary incentive to step up. While the e-mobility sector has proved itself as having the ability to redefine the transportation industry, the market is still extremely fragmented in terms of both services and stakeholders. We at Venionaire have published an comprehensive research about the dynamics, opportunities and challenges of the e-mobility sector.

For more information, check out our Venionaire Research website.