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Policy
| 06/22/16

Volkswagen shifts to electric ahead of the pack

TCE

Falling battery prices are being credited as being one driver behind surging electric vehicle sales, amidst Volkswagen’s unprecedented shift among major auto-makers to become a world leader in green transportation.

Last week Volkswagen (VW) released its “TOGETHER – Strategy 2025”, a plan which aims to release 30 new electric vehicle (EV) models within the next nine years. The company has set an annual sales target of between two and three million electric vehicles, representing some 25 percent of its global sales: a huge departure from its current diesel/gasoline mainstay. This plan, short on details but full of ambition, comes nine months after VW was caught cheating on US emissions tests in which it programmed its engines to use emissions control technology during testing only, and one month after agreeing to fix or buy back half a million cars with the faulty software in the US.

While Volkswagen’s move is being seen as bid for redemption, it also marks an alignment toward a widespread long-term trend of electric vehicle growth. The market for electric vehicles has been steadily expanding since 2010, as falling battery prices and government incentives, such as BC’s Clean Energy Vehicles for BC program, have faced off against a tumultuous oil market. According to new analysis, unsubsidized EVs will reach price parity with their gasoline counterparts in the next six years, largely due to cheaper batteries, which fell 35% in price in the past year alone.

Nearly half a million electric vehicles have been sold in the United States, more than a million have been sold globally and battery electric vehicles have been steadily gaining market share over hybrids over this period. However, while sales have been growing, electric vehicles still make up only about one percent of vehicles sold in the US, 0.3% in Canada and about 0.6% worldwide. However, this is projected to continue to increase, with a recent study suggesting that electric vehicles may make up about 35% of all new global car sales by 2040.

Meanwhile, Dr. John Axsen from Simon Fraser University’s Sustainable Transportation Action Research Team (START), has welcomed VW’s decision, saying it will address one of the sector’s biggest barriers, supply.

If VW and author automakers can succeed in bringing a wide variety of plug-in hybrid and battery electric vehicles to market, then we could see new market share grow up to 30% or more in Canada. Without such a huge increase in supply, our research indicates that market share won’t likely get above 5 or 10%.

Furthermore, Axsen says he hopes VW’s announcement will encourage more governments to enact policies to support the transition. “For example, more provinces might follow Quebec’s recent announcement to enact a Zero-Emissions Vehicle (ZEV) Mandate, like California’s successful policy — which makes sure that consumers get more access to electric vehicles,” he said.

Emissions from the transportation sector currently make up about 28% of Canada’s greenhouse gas emissions and about 14% of global emissions.

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