Cars, mobility transition is only feasible with a mix of technologies

In the hope that the Commission's opening on e-fuels is a first step towards a pragmatic and also economically sustainable revision of Fit for 55, new challenges and opportunities will emerge.

The industry, which has so far invested hundreds of billions globally and claimed to have planned further electrification investments in excess of USD 600 billion over the next five years, will reasonably review its plans for electrification. This will mean revising the expected return on investments made, potentially putting at a loss those with less chance of success with the consequences for manufacturers and suppliers who, while not facing an economic cliff, will still have to overcome a long valley or another 'profit desert' (and recovery of investments made). The factory and cost reduction plans that are receiving a lot of media attention are an example of this.

On the other hand, a confirmation of the regulatory change is likely to mean that future plans will be revised with a more pragmatic and tactical logic, re-evaluating plans that envisaged 17 of the 24 new vehicle platforms announced by 2030 to be BEVs.

Market and consumer will return - as they deserve - to the heart of the industry's strategies, putting an end to the strabismus imposed by regulation.In the meantime, some key competitive factors will continue to play a primary role in the competitive dynamics: strong production overcapacity (in China alone, it is estimated that there is an overcapacity of about 20 million vehicles, more than the entire enlarged European market), demand that is substantially stagnant in the medium term (expected growth of registrations in Europe of less than 1% per year between 2024 and 2030), consequent price war also in defence of quotas otherwise threatened by the enlarged competition of the new Chinese players with a 35% cost advantage (capable, therefore, of absorbing any additional duties).

In this very critical context, the openness to new technologies will enable the acceleration of alternative forms of decarbonisation that industry had put in the drawer in the face of regulatory-driven technology imposition.

Although at different stages of maturity, there are alternative technologies with zero impact (on the overall cycle): biogas recovered from industrial and biological processes, e-fuels produced through carbon capture, BioDiesel by offsetting (part of) the CO2 emitted by the vehicle with that absorbed in the fuel production process, synthetic fuels produced from waste biomass, hydrogen that could power combustion engines without emitting CO2 or converted into electricity for traction.

On some of these technologies, among other things, Europe and Italy in particular have skills and leading companies that can justifiably play an important role in the common goal, at the same time nurturing a technical and industrial fabric otherwise condemned to a marginal role or a difficult reconversion.

The development of all these technologies was underway and slowed down considerably when in the initial drafting the legislation did not consider them as 'zero-emission'. To the extent that alternative technologies were taken into proper consideration, industry could re-accelerate their adoption and benefit from them both in the short term with more mature and already available technologies (gas), and in the medium and long term (e.g. e-fuels and hydrogen, which in order to be deployed in industry need to achieve cost competitiveness and in the case of hydrogen also an abundant and economically competitive supply of renewable energy).

The pathways therefore exist, and the transition can truly be achieved through the adoption of a mix of technologies in which both BEVs and alternative fuel vehicles contribute to the overall goal.

(*) Italy Country Leader and EMEA Leader for Automotive & Industrial at AlixPartners.