The affordability of car use in the future
21101
2022
TML investigated how EU policies affect the affordability of cars by calculating the total cost of ownership of different car models in Denmark, Germany, and Italy. We also conducted scenario analyses to look at the impact of different factors on costs and investigated measures to help consumers switch to electric vehicles.
EU climate and energy policies have led to significant reductions in greenhouse gas emissions in all sectors except the transport sector. According to the European Commission's 2020 baseline scenario, which takes existing policies into account, CO2 emissions from transport will fall by 22% in 2050 compared to 1990. This is far from the 90% reduction by 2050 needed to contribute to the overall 2050 climate neutrality target.
The European Commission's Fit for 55 package contains proposals to become climate neutral by 2050. If adopted, it will have a significant impact on greenhouse gas emissions from road transport.
TML examined the future affordability of car ownership and use in Europe in the context of proposed EU policies and the current energy crisis. Stricter CO2 emission standards and the future ban on the sale of new fossil-fuel passenger cars in Europe imply that the European car fleet would eventually have to become electric. As electric cars are currently still more expensive to buy than comparable fossil-fuel cars, this raises concerns about the future affordability of car ownership and use. In the context of the current energy crisis, these concerns have become even more topical.
To assess the future affordability of passenger cars in Europe, TML calculated the total cost of ownership (TCO, i.e. total cost of ownership) for different car models in three countries: Denmark, Germany, and Italy. The selection of the countries was based on their different tax regimes for electric vehicles (EVs) and internal combustion engine vehicles (ICEVs). Under current conditions, the TCO of electric cars appears to be lower than that of comparable ICEVs. However, if the current financial incentives for EVs were removed, this would no longer be the case and the affordability of passenger cars would deteriorate significantly. TML examined the effect of different scenarios on TCO and assessed the impact of assumptions for individual cost items in multiple sensitivity analyses. From these, we were able to conclude that the energy crisis does not significantly affect the cost difference between EVs and ICEVs, as petrol and electricity prices are determined in a relatively similar way. The TCO for all vehicle types is increasing, affecting the overall affordability of passenger car use in Europe. Current high energy prices increase the TCO of passenger cars to almost 10%.
Finally, based on desk research, we elaborated on possible flanking measures to support consumers in the transition to electric vehicles. The development of a dense and high-quality public charging network appears to be most important in this context. Financial incentives also help to support motorists, but they are best designed and applied to benefit those who need them most. Measures to support the second-hand market are currently insufficient, while their importance for lower-income households is high.
The final report was published on the client website and serves as a basis for FIA's communication to its members and policy work.
EU climate and energy policies have led to significant reductions in greenhouse gas emissions in all sectors except the transport sector. According to the European Commission's 2020 baseline scenario, which takes existing policies into account, CO2 emissions from transport will fall by 22% in 2050 compared to 1990. This is far from the 90% reduction by 2050 needed to contribute to the overall 2050 climate neutrality target.
The European Commission's Fit for 55 package contains proposals to become climate neutral by 2050. If adopted, it will have a significant impact on greenhouse gas emissions from road transport.
TML examined the future affordability of car ownership and use in Europe in the context of proposed EU policies and the current energy crisis. Stricter CO2 emission standards and the future ban on the sale of new fossil-fuel passenger cars in Europe imply that the European car fleet would eventually have to become electric. As electric cars are currently still more expensive to buy than comparable fossil-fuel cars, this raises concerns about the future affordability of car ownership and use. In the context of the current energy crisis, these concerns have become even more topical.
To assess the future affordability of passenger cars in Europe, TML calculated the total cost of ownership (TCO, i.e. total cost of ownership) for different car models in three countries: Denmark, Germany, and Italy. The selection of the countries was based on their different tax regimes for electric vehicles (EVs) and internal combustion engine vehicles (ICEVs). Under current conditions, the TCO of electric cars appears to be lower than that of comparable ICEVs. However, if the current financial incentives for EVs were removed, this would no longer be the case and the affordability of passenger cars would deteriorate significantly. TML examined the effect of different scenarios on TCO and assessed the impact of assumptions for individual cost items in multiple sensitivity analyses. From these, we were able to conclude that the energy crisis does not significantly affect the cost difference between EVs and ICEVs, as petrol and electricity prices are determined in a relatively similar way. The TCO for all vehicle types is increasing, affecting the overall affordability of passenger car use in Europe. Current high energy prices increase the TCO of passenger cars to almost 10%.
Finally, based on desk research, we elaborated on possible flanking measures to support consumers in the transition to electric vehicles. The development of a dense and high-quality public charging network appears to be most important in this context. Financial incentives also help to support motorists, but they are best designed and applied to benefit those who need them most. Measures to support the second-hand market are currently insufficient, while their importance for lower-income households is high.
The final report was published on the client website and serves as a basis for FIA's communication to its members and policy work.
