15 million EVs by 2030: Political hesitation and higher tariffs on Chinese imports will push Germany’s goal far out of reach

Berlin, 20 August 2024 – The goal of putting 15 million electric vehicles (EVs) on German roads by 2030 can only be achieved through targeted policy measures in combination with an expanded Chinese presence in the German market. Indeed, policy inaction would lead the 2030 adoption target to be missed by some 6 million vehicles. These are the key findings of a new study conducted by the Berlin-based think tank Agora Verkehrswende in partnership with Boston Consulting Group (BCG). The study assesses the economic and policy conditions governing the expansion of the electric vehicle fleet in Germany while also considering the role that can be played by Chinese manufacturers. Higher import duties on electric vehicles from China would lead to higher prices for customers while also jeopardizing the competitiveness of the German automotive industry, the study concludes.

“Anyone committed to both climate goals and the future of Germany’s automotive industry should push for the accelerated expansion of the domestic EV fleet in collaboration with Chinese manufacturers,” says Christian Hochfeld, Director of Agora Verkehrswende. “While this may appear counter-intuitive, accelerated structural change will enhance the competitiveness of German car manufacturers while also augmenting strategic sovereignty vis-à-vis China. The development of domestic battery production and associated supply chains will make us less dependent on China, which currently has a dominant market position in battery technology. Chinese direct investment to establish production capacities in Europe will produce greater economic benefits than Chinese imports. At the same time, cooperation with Chinese companies in the area of battery technology would allow German firms to engage in joint R&D projects and catch up in terms of innovation. Higher import tariffs or more extreme forms of protectionism would ultimately endanger the future competitiveness of German companies. Chinese manufacturers can help to accelerate the adoption of EVs in Europe, particularly in smaller, more affordable vehicle segments. The German government and the EU should take this into account when deliberating the imposition of higher tariffs on EV imports from China.”

In a scenario in which the 15 million EV target is met, approximately 15% of the German electric vehicle fleet, particularly in low-price segments, would be of Chinese origin, the study estimates. This corresponds to around 2.2 million vehicles. If the EU were to increase import duties by 20 to 40 percentage points, as is currently being considered, Germany would miss its 15 million target by 1.3 to 2.4 million vehicles, even given far-reaching measures by the German government to encourage EV adoption.

The importance of comprehensive policy action

The study’s model calculations indicate that comprehensive policy action is required to meet the 2030 target and close the 6 million vehicle gap. One important measure would be to reform annual registration taxes and company car taxation rules to make EVs cheaper and combustion engine vehicles more expensive. Annual registration taxes could be reformed to more strongly reflect CO₂ emissions, with the modified rate schedules only applying to first-time registration. Another promising steering mechanism identified by the study would be to establish EV quotas for vehicle manufacturers and commercial fleet operators.

A quota for commercial fleets in combination with vehicle tax reform, for example, would lead to 4.2 million additional EV registrations up to 2030 – namely, 1.1 million private vehicles and 3.1 million commercial vehicles. Another measure advocated by the study would be to accelerate the expansion of charging infrastructure; this would encourage the adoption of some 0.3 million additional EVs up to 2030. While various combinations of consumer incentives and regulatory measures designed to bolster EV adoption are conceivable, no set of policies is sufficient to fully close to 6 million EV gap. In the modelling performed as part of the study, the residual gap of 1.5 million vehicles can only be closed with an expanded Chinese presence in the German market.

Kristian Kuhlmann, a co-author of the study and partner at BCG, says: “Well-coordinated regulatory initiatives are needed to achieve the 15 million EV target. Predictable regulatory and market conditions are essential for vehicle manufacturers to make long-term planning and investment decisions. Punitive tariffs will generate uncertainty among investors, consumers, and manufacturers. For their part, manufacturers should focus on producing an internationally competitive and attractive range of electric vehicles.”

Protecting jobs while reducing the cost of transformation

In terms of employment effects, the accelerated EV adoption scenario offers significantly better prospects over the medium to long term, despite the challenges of transformation. By 2030, the number of jobs in the core automotive industry will fall by approximately 8%, according to the study’s estimates. However, new jobs will be created in adjacent industries to meet higher demand for batteries, renewable energy, and charging infrastructure. The employment shifts associated with this structural transformation will require additional investment in training and further education. A continued reliance on combustion engine vehicles in combination with a delayed transition to e-mobility does not represent a reasonable policy alternative, for it would mean even higher job losses in the core automotive industry over the long term.

Achieving the 15 million vehicle target by 2030 would require overall costs of between 45 and 65 billion euros (to finance customer purchase incentives; to defray additional costs accruing to manufacturers and fleet operators for BEV quotas; and to expand charging infrastructure). The exact amount of funding required and its distribution between the public sector, manufacturers, and consumers would depend heavily on the specific set of measures adopted and their design. Yet inaction would be likely to result in significantly higher costs beyond 2030, given lost market share and associated job losses, which would have negative knock-on effects for GDP and tax revenues. Inaction would also mean a failure to meet internationally binding climate protection pledges, which would be likely to entail financial penalties and sanctions – not to mention the additional damage that would occur to the environment and climate.

Christian Hochfeld notes: “The automotive industry showcases the degree to which industrial and climate policy are now closely interwoven. Both the climate and the German automobile industry stand to benefit from a future in which mobility is electric. Yet this future won’t become reality through idle talk alone. E-fuels and hydrogen are not a genuine alternative in the passenger car segment. However, the extensive public discussion of this issue has muddied the facts while discouraging consumers from making the switch. The path ahead is clear. All that’s missing now is decisive action by industry and government. Fifteen million EVs by 2030 and climate neutrality by 2045 require a rapid and accelerated transition to e-mobility. Conditions will never be as favourable as they are today – and this may well be our last chance. So what are we waiting for?”

You can download the executive summary of the full report and a PDF presentation of the study’s findings at: www.agora-verkehrswende.de/en/publications/last-chance-for-15-million-electric-vehicles-by-2030/.

About Agora Verkehrswende

Agora Verkehrswende is a Berlin-based think tank that seeks to promote climate-friendly mobility. Non-partisan and non-profit, it works together with key stakeholders in the fields of politics, business, academia and civil society to decarbonise the transport system. To this end, the think-tank team develops evidence-based policy strategies and recommendations. Agora Verkehrswende was initiated in 2016 by Stiftung Mercator and the European Climate Foundation. More information: www.agora-verkehrswende.de

About Boston Consulting Group

Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact. Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place. More information: www.bcg.com