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BCG study finds conventional automotive technologies have high CO2 reduction potential at lower cost; stiff competition for electric cars

BCG comparison of the CO2 reduction potential and cost of different technologies. Source: BCG. Click to enlarge.

Conventional automotive technologies have significant emission-reduction potential, according to a draft of the Boston Consulting Group’s (BCG) latest report on automotive propulsion, Powering Autos to 2020. Advanced combustion technologies alone could reduce CO2 tailpipe emissions by 40% from current average levels for new-vehicle fleets of 250 to 270 grams per kilometer (g/km) in the United States, 150 to 170 g/km in Europe, 130 to 140 g/km in Japan, and 200 to 215g/km in China, according to the analysis.

In addition, the cost to the consumer would be about $50 to $60 per percent CO2 reduction—roughly half the cost of what was expected three years ago. As a result, BCG concludes, the electric car faces stiff competition from ICEs (internal combustion engines) and, based solely on total cost of ownership (TCO) economics, will not be the preferred option for most consumers.

BCG finds that ICE technologies can reduce CO2 emissions up to 40% at a cost as low as $50 per percentage of reduction. Source: BCG. Click to enlarge.

BCG also suggests that if governments switch their regulatory focus from tailpipe emissions to the broader well-to-wheel metric for gauging vehicles’ environmental impact, the environmental argument for EVs becomes less compelling.

Based on our current projections, the well-to-wheel emissions advantage of EVs over ICE-propelled vehicles, currently estimated at 40 to 60 percent, will fall to 30 to 50 percent in 2020 as advances in ICE technologies narrow the gap and power generation from clean non-fossil fuels continues to grow slowly in most regions.

—“Powering Autos to 2020” (draft)

Although battery costs will fall sharply (approximately 64% from 2009 levels) to $400 per usable kWh at the pack level, this still represents a cost of $9,600 per vehicle to the consumer for the typical 20 kWh battery necessary for a pure battery EV. Total cost of ownership economics for electric cars will also be significantly influenced by government incentives and fuel and electricity prices.

BCG expects pack costs for OEMs will fall to ~$360-440 per kWh by 2020. Source: BCG. Click to enlarge.

Notwithstanding the high costs, however, BCG projects that EVs will see relatively strong uptake from specific consumers. In particular, there is evidence of a “green” consumer cohort (approximately 6% of consumers in the United States and 9% of those in Europe) that is willing to pay more for an EV even if the TCO economics are not compelling.

In addition to their relatively high total cost of ownership, EVs face substantial go-to-market challenges—including questions about battery durability and establishment of the required charging infrastructure—that will impact their rate of adoption.

The study concludes that China and Europe, not the United States, will be the largest markets for EVs in 2020, driven by strong government support. However, China is a major wildcard. Significant public messaging from the government on EVs has yet to lead to either promised breakthroughs in battery technology or significant sales outside of public fleets. The government’s efforts have, however, increased consumers’ awareness.

Assuming the China government remains committed to EVs, BCG expects that these vehicles will represent 7% of new vehicle sales in 2020, supported by car buyers’ enthusiasm for the technology and the country’s high gasoline taxes.

A combination of peak oil with incentives or lower battery costs could increase EV penetration by 6%. Source: BCG. Click to enlarge.

EVs will likely account for approximately 8% of new car sales in Europe by 2020, supported by consumers’ higher willingness to pay for green technologies, the region’s high emissions standards, and high gasoline and diesel fuel taxes.

Combined, EVs and hybrids could reach 15% of aggregate new-car sales in the four major markets—Europe, North America, China, and Japan—in 2020. As OEMs ramp up capacity to meet this demand, they will have to simultaneously invest in advanced ICE technologies, BCG notes. This will pose a significant production and supply-chain challenge and likely force OEMs to increasingly globalize powertrain production, the consulting firm concludes.

Conventional technologies with high CO2 reduction potential. Source: BCG. Click to enlarge.

ICE-propelled vehicles. Within advanced ICE technologies, engine downsizing, turbocharging, optimized cooling, low friction, start-stop systems, electric power steering, direct injection, and variable valve timing will likely lead. BCG expects these to be mainstream across most passenger-car segments in all major markets.

Ultimately, we believe that most OEMs should be able to meet 2020 emissions targets via a combination of modifications to ICE engine technologies and other levers (for example, reductions to vehicle mass) and do so in a cost-effective manner. Our current projections are that, via these measures, OEMs will be able to reduce gasoline-fueled vehicles’ CO2 emissions by 15 to 49 percent, with an impact on the cost to the consumer of 2 to 16 percent per vehicle, and reduce diesel-fueled vehicles’ CO2 emissions by 3 to 36 percent, with a cost impact for the consumer of 4 to 12 percent per vehicle.

Hence the need for OEMs to pursue EVs from a 2020 emissions standpoint is minimal, even though EVs will undoubtedly play a major role in meeting 2035 and 2050 ambitions.

—“Powering Autos to 2020” (draft)

BCG sees fewer levers available for diesel-fueled ICEs, which are already optimized. The most promising levers for that technology are turbocharging, which is already well developed, and the still-nascent homogeneous charge combustion ignition (HCCI), according to BCG. These could reduce CO2 emissions by 5 to 10 percent and 10 to 15 percent, respectively.

Alternative fuels could also play a role in emission reduction for ICE-propelled vehicles, BCG notes.

The consumer. BCG’s market research found that consumers in the United States, Europe, and China are interested in alternatives to the traditional gasoline-fueled ICE powertrain; of these alternatives, hybrids and electric vehicles resonate most strongly with consumers. HEVs garner the most interest, with 73% of US and 75% of European consumers indicating interest. EVs are also favored by consumers, with 64% of US, 70% of European, and 91% of China consumers indicating interest.

BCG found that there is a “green” consumer segment—which it defines as consumers willing to pay more for a green car even if the TCO economics are unfavorable—that represents about 6% of car buyers in the US, 9% in Europe and 13% in China.

These buyers are willing to pay an average premium of $4,500 to $6,000, on average, when purchasing a green vehicle; do not expect their upfront investment to be amortized over time through lower operating costs; and are willing to pay about 10 to 20 percent more in terms of the total cost of ownership over the vehicle’s life. OEMs will likely find their first EV buyers in this segment: 15 percent of consumers in this group are willing to pay a premium of more than $10,000 upfront—enough to cover the price difference between a gasoline car and an EV. Other consumers in this group say they could be convinced to purchase if the upfront price differential were spread over several years through a leasing offer, giving this mode of financing an edge over straight purchase for OEMs looking to drive adoption.

...About 40 percent of car buyers in the United States and Europe, and 50 percent in China, are willing to pay more upfront (approximately $4,000 more on average) for a green car if this investment is paid back through lower operating costs. Most consumers in this group expect a payback within three years. A significant minority (15 to 20 percent), however, is willing to accept payback of five years or longer, which is close to the estimated payback horizon for hybrids in 2020. Swaying this group toward EVs will take either lower-than-expected battery costs or government incentives, such as purchase incentives or fuel taxes, to shorten payback periods. Governments could also sweeten the deal by offering significant non-financial incentives, such as preferred parking or the use of high-occupancy-vehicle lanes in urban areas.

Finally, 56 percent car buyers in the United States, 48 percent of car buyers in Europe, and 34 percent of car buyers in China say they are not willing to pay more upfront for alternative powertrain technologies. For the time being, this segment will likely stay with conventional gasoline ICEs.

—“Powering Autos to 2020” (draft)

The final report is scheduled to be released in July.



From my calcs that also means that if the hybrid premium drops to $3,300 than it becomes the better deal.

Also makes no account of cost of air pollution which starts to favour hybrids and EV's as does taking into account lower running (non fuel) costs and resale value


Brilliant! Let's just ignore the whole EFF'ing oil issue and pretend that only CO2 matters (if you even believe their numbers).

Just EFF'ing brilliant.

WooHooooo!!!! Let's buy some more oil! Hey, $400+BILLION a year is not enough, let's double it! Let's triple it! Let's spend some more on the military to protect it and add some more tax breaks and subsidies to it until there is nothing left in the US economy EFF'ing at all!!!!


Somebody shut these morons up.


$400 billion per year is nothing, the interest on the U.S. national debt is more than $500 billion per year. At least we get oil for that money.


@ DaveD

Right, if you don't like the message just kill the messenger. Wasn't that what the USSR did?


Without nuclear, wind, solar etc, reduction in tailpipe emissions is not quite the correct goal. W2W is.

The typical 4:1 "fuel" cost reduction for an EV over an ICE also includes no road tax on the electricity. Not that I expect the government to miss the opportunity, nor care, if they tax us into behavior that may not be the best.


I don't see what the fuss is about.

They say we can improve the ICE - that seems reasonable.

They say we can lighten the car and make it more aerodynamic - that seems reasonable, and affects both ICE and EVs.

They say you should count W2W CO2, not just tailpipe CO2 - seems reasonable.

If C02 makes you fume, just think in terms of fuel economy, the two are more or less aligned.

It doesn't matter how we get to lower energy personal transport, or what the final form is, it just matters that we get there, and still have a functioning global economy at the end of it.


We are going to need these better ice cars AND ev's. The ev technology is a long way from mainstream, it will take years, if not decades, to reach that stage.

The takeaway message from this report is: do not forget the short term gains in better ice technology, while ev technology is being developed.

BCG says: EVs will likely account for approximately 8% of new car sales in Europe by 2020

I have not seen such high estimates before. EV penetration estimates usually hovered around 1% in 2020. Good news.


Study not complete. PHEV 20 and PHEV 40 options have not been investigated. Under consideration was only old Prius type hybrid. For PHEV 40 tailpipe emissions at least 80% less.

For CNG tailpipe emission reduction 65% - how come? Is any estimate of new infrastructure cost?

I think in general study idea is good but need better accurasy.


Nice to see less of an over-obsession with EVs. Yes they will have a role, but only for short trips, provided that they don't compete for journeys that are better made by foot, bike and bus in the first place. Until anything fundamental happens (i.e. with fuel cells) EVs won't be very practical for those 10-25% longer distance journeys that influence people's car buying decisions.

So, beyond all of the pro-EV politics, it's just as good to improve ICE efficiency. If fuel's a main concern people forget that there are altenatives to oil with synthetic fuels derived from other soutrces - biomass, potentially captured and synthesised CO2 and hydrogen stored as hydrides in nanobeads (Cella Energy).

So its pretty irresponsible just to bet on EVs when ICEs: a technology that has been with us for over 100 years and now improving at a much greater pace.

Lets move away from the propaganda that car-makers are in bed with oil companies. Stupid politics l;ike this does nothing for progress.

In other words - don't put all of youe eggs in the EV basket unless you want them scrambled. Keep an open mind instead.


Yes ICE has been with us for over 100 years, and has not significantly improved for quite a while. Most of the recent improvements come from hybridizing them. Sure we should continue to improve them, but they are still an inefficient platform compared to EV's. EV's are practical right now for at least 90% of all driving, it makes no sense to discount them because they might not work for 10% of driving. Most long trips aren't even necessary while getting to and from work and shopping are. We should all be driving less anyway, regardless of the vehicle, unless it's a bicycle.


Sad but probably mostly accurate.

This is what we would like NOT to believe.

Reality is overrated.


It depends on what the individual wants and what the country wants. The buyer may want lower fuel costs, the nation may want less oil imports and cleaner air.

When those two intersect, there can be progress. People look at car price versus fuel costs over years. Nations look at the overall energy picture and what millions of cars with efficiency technology can do.


You have to consider my rant for what it was intended...and the fact that everyone should get at least one good rant a month :-)

Seriously, I think it is so damaging when we look at CO2 emissions in a vacuum.

You say CO2 emissions and the average person hears: "I'm a treehugger and I want to stop all progress, kill jobs and small business and tax you into the stoneage".

You say foreign oil and they hear: "they're taking our jobs!!!".

And SJC...I agree with you on most things, but not this time. That $400Billion is VERY important. And it is the tip of the iceberg. There are all the subisdies and the military size, the wars, etc, etc, etc. No, that money part is very important.


My point is that we get 4 billion barrels of for the $400 billion, all we get for the $500 billion in national debt interest is more of the same.


Your point is valid, but limited. We get present value for the interest we pay, but more importantly, if the $400 billion in foreign oil was recirculated in our economy instead of theirs, tax revenues would rise and debt could fall. Not to mention DaveD's point about military costs and wars to keep the world's oil supply safe.


If you have read my posts over time you will see that I am all for reducing imported oil for many reasons. My point is that this is not an immediate threat nor deal breaker. Defaulting on bond payments is much worse, not planning and not deploying synthetic fuels is much worse.


USA (and friends?) will have to do more to stay on top. Gone are the days when we could get OIL and other natural resources almost FREE to mass produce 1001 products at very low price. Manufacturing an jobs are moving out at an increasing pace.

The local living standards will keep going (relatively) down as more goods are imported, more good paying jobs disappear, and specially if the Chinese currency re-evaluated up.

Reducing Oil and natural resources importation may become part of the downward cycle started 3+ years ago.

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