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George Diepenbrock
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Policies by France, Volvo could shake up market for gasoline, diesel vehicles, researcher says

Fri, 07/14/2017

LAWRENCE — France's government is seeking to end the sale of gasoline and diesel vehicles by 2040.

Swedish automaker The Volvo Group also recently announced an ambitious plan that all of its cars would be fully electric or hybrid by 2019, meaning no more vehicles solely powered by an internal-combustion engine would come off a Volvo production line by 2020.

Policymakers to automakers to climate change advocates will be watching these developments to see what they possibly could mean for the future of fossil-fuel powered vehicles.

Bradley Lane, assistant professor in the University of Kansas School of Public Affairs & Administration, discusses policy issues related to production and use of internal-combustion engines and alternative vehicles and fuels, including the recent decisions by France and Volvo. Lane's research interests include public policy and transportation, including travel behavior, electric vehicles, fuel prices and public transport.

Q: What is the significance of a government-driven policy decision in France seeking to move away from sale of gasoline and diesel vehicles by 2040? And also, a business, Volvo, to commit to manufacture all vehicles as electric or hybrid by 2019?

Lane: I think each of these moves has its own, separate significance. France moving away from selling gasoline and diesel vehicles by 2040, and other such mandates — such as India going all electric by 2030 — is another logical step in a long-term series of targets that many state actors have employed to incentivize not just the purchase and adoption of these vehicles, but also investment in the technological development and production of these vehicles.

Such targets are appealing to policy makers and government actors because in addition to providing a direction for the market to go, they are far enough on the horizon so that failing to meet them doesn't cause electoral or public relations harm in a way that a goal of, say, military action in the next 18 months would. By 2040, even relatively young President Emmanuel Macron of France and Prime Minister Justin Trudeau of Canada will be old. 

France in particular has a large source of "clean" electrical energy in the form of a fairly vast nuclear infrastructure at the ready for such a transition, which makes them a more likely leader to make such a declaration. Also notice that they are intentionally nebulous about the terms they use. They say "gasoline" vehicles, but I'm guessing that doesn't exclude conventional or plug-in hybrids, which of course also have an internal-combustion engine, or ICE, and which the research is increasingly clear in indicating they will serve as a transition technology away from petroleum in transportation.

Meanwhile, to me the more meaningful and striking move is by Volvo to manufacture only electrics and hybrids by 2019. I asked a Ford executive about seven years ago what would happen to the market for alternative-fuel vehicles if a major automaker announced it was only making hybrids or electric vehicles, and they couldn't answer because a company doing so was inconceivable.

So that has obviously been a rapid change. Volvo's target year, 2019, is also not very far away. Most automakers are rolling their 2018 models out, which means you're talking at most two model-year cycles before they are fully hybrid or electric. So, it is a very strong statement by a long-term major automaker. It is also somewhat clever in that doing so is actually relatively easy for an automaker to do, in the sense that they already make hybrids and electrics, and wouldn't have announced this if they already hadn't figured out how to make all the models they want to sell as a hybrid and/or electric.

The biggest issue is production capacity, and that also has to be something that they've been planning for a while, because it would be extremely difficult for an automaker to retrofit all its production plants to hybrid and electric production only that quickly.

Q: In looking at the two, could it be a test or perhaps case study to look at which type of change – government or business — is more effective at spurring movement away from ICE vehicles? Or is that not a fair question?

Lane: I have no doubt that many researchers — and many more politicians and CEOs — will study and make claims at which is more effective in spurring movement away from ICEs. I think the reality is that governments and industry all over the world often work together, either explicitly or through lobbying, in policy formation, and that isolating the effect of one over the other is very difficult.

Government cannot effectively execute economic policies that involve massive changes to the market without industry being able to make and sell the products that make those changes, and the industry has proven time and time again extremely reluctant to pursue development of environmentally friendly technologies and products to a general audience without some kind of government mandate or directive. I do think there is an argument to be made that government is more effective at starting a movement away, and industry at developing and advancing that movement once past a certain threshold. At least in the case of ICEs and alternative-fuel vehicles, we're still a long way from replacing gasoline as the primary fuel of transportation.

Q: Do these types of decisions have the potential to influence a noticeable shift in the future away from ICE vehicles? Or will it likely take many more decisions like this?

Lane: These types of decisions have the potential to influence a notable shift away from ICE because they will begat many more decisions like this. Major world leaders, either in terms of countries, like France, or industry players, like Volvo, don't make moves or announcements like this unless they are pretty sure they see a trend and are looking to position themselves as early pioneers to gain a competitive advantage on an emerging market.

So, if France does this, it's likely that other countries will follow in time, and as more countries follow, more look and think this is a direction that we must go in order to stay with our competitors. Likewise, if Volvo does this, other similar size auto companies are likely thinking they, too, can be a part of this section of the auto market. Eventually enough do it that your major automakers – which I promise you are all, somewhere, even if just deep in the recesses of their research departments, planning for a transition away from ICEs – realize they have to push their own plans forward to stay competitive.

Q: What else is an important backdrop of this decision and these types of discussions? The Trump administration's decision on the Paris Climate Accord seems to be what has received the most attention lately on a global scale. 

Lane: I think it is incredibly important and severely underreported that the Trump administration has made nary a peep about reducing or eliminating subsidies or investment in electric and alternative fuel vehicle technology.

This is the most disruptive presidential administration we have seen in quite some time, likely since the first FDR term — albeit in diametrically opposite ways— and electric-vehicle industrial development and purchase incentives were targeted by Republicans and conservatives during the Obama administration as an area to reduce government spending by scaling back investment in them. That changed over the last few years, and the lack of any push to reduce spending and investment in these technologies is really striking.

It also means, especially when considered with the Trump administration's withdrawal from the Paris Climate Accord, that electric vehicles appear to have made the transition from a purely environmentalist-based phenomenon to a full-blown economic and industrial one, and investment in them is now recognized as necessary for economic growth and international industrial competitiveness.



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