"Electric Vehicle Market Rapid Growth Has Reasons"…Carbon Regulations Drive Transition to Electric Vehicle System

Stage 1: Experience Electric Vehicles with Subsidies and Tax Benefits
Stage 2: Promote Vehicle Electrification through Carbon Regulations
Stage 3: Establish Electric Vehicles through e-Mobility Demand Expansion

[Asia Economy Reporter Hwang Yoon-joo] The rapid growth of the electric vehicle (EV) market has been largely driven by government policies. Currently, the market is shifting from carrot policies such as subsidies and tax benefits for EV purchases to regulatory policies that are pushing market expansion with a stick. It is expected that once the e-mobility-based market is established around 2025, the proportion of electric vehicles will increase noticeably.

◆ Stage 1 Subsidies Followed by Stage 2 Strengthened Carbon Regulations = In the early days, the EV market grew through incentives such as subsidies and tax benefits provided by various countries to promote electric vehicle adoption. From 2020, CO2 emissions and fuel efficiency regulations have become more stringent. Europe, in particular, operates some of the strictest policies limiting CO2 emissions.

Starting in 2021, Europe imposes a fine of 95 euros on every new vehicle for each gram exceeding the annual average CO2 emission target of 95g/km. By 2025, CO2 emissions must be reduced by 15% compared to 2021 levels, and by 37.5% by 2030. According to estimates by PA Consulting, the total fines for major European automakers in 2021 could reach 14.7 billion euros (approximately 20 trillion KRW). Due to Europe's CO2 regulations, global automakers have no choice but to pursue electrification strategies.

China, one of the largest markets, enforces not only fuel efficiency regulations but also mandates that automakers produce a certain percentage of New Energy Vehicles (NEVs) relative to their total production each year. Failure to meet these quotas results in suspension of certification applications and announcements. The United States is also expected to establish and announce stricter vehicle emissions standards by July.

◆ Battery Performance Improvements Also Drive the EV Market… Stage 3 Expansion of Shared e-Mobility Demand = Improvements in battery performance and price competitiveness, which account for a significant portion of EV costs, are also key growth drivers. The energy industry research firm BNEF predicts that by 2027, the production cost of electric vehicles will become lower than that of internal combustion engine vehicles, marking a reversal. This is expected to be a pivotal point for expanding EV market share.

After 2025, the EV market is anticipated to grow complementarily in connection with services based on sharing driving data, service networks, and pricing. Mobility as a Service (MaaS) is a prime example. MaaS goes beyond vehicle sharing services to encompass all modes of transportation, including personal vehicles, trains, buses, and taxis. It allows anyone to combine preferred transportation modes to create door-to-door services.

Industry experts explain that if autonomous driving functions are perfected, labor costs and operational efficiency will improve, maximizing service convenience. Combined with electric vehicles, which offer electricity costs about 20-30% cheaper than fuel and relatively low maintenance and repair costs, MaaS is expected to spread even further.

This content was produced with the assistance of AI translation services.