Tailpipe emissions from cars, trucks, and other road vehicles account for around 75 percent of all carbon emissions from mobility—approximately six gigatons of CO₂ per year. This makes up close to 15 percent of total global CO₂ emissions. Decarbonizing vehicles will primarily involve replacing those that currently run on fossil fuels with electric vehicles (EVs) that are battery powered or hydrogen fuel-cell operated.
The shift to low-emission vehicles will disrupt the entire automotive supply chain and create a significant change in the market for auto components. Demand for batteries and electric drives will grow, while conventional transmissions and engines will see a decline.
In a net-zero scenario, first movers establishing the new supply chains and manufacturing capabilities would likely see increased competition, especially with batteries, as more players enter the market. Companies may find new opportunities across the value chain, including the creation and maintenance of the corresponding infrastructure: electric-charging stations and hydrogen-fueling stations, plus upstream production of electricity and hydrogen.
Overall, some $3.5 trillion per year would be spent on low-emission vehicles and on charging and fueling infrastructure between 2021 and 2050.
The shift to low-emission vehicles could create opportunities for companies across the value chain. Such opportunities include manufacturing EV batteries and fuel cells; producing the materials needed to make those essential components; building, making, and operating the infrastructure for charging battery EVs (BEVs) and refueling fuel cell EVs (FCEVs); and creating digital solutions to integrate the new vehicle energy infrastructure with the power grid. The net-zero scenario could also feature a rise in e-hailing and micromobility services (e-bikes and e-scooters).
$3.4 trillionspent on low-emission vehicles per year
$100 billionspent on EV-charging and hydrogen-fueling networks per yearAccelerating the shift to electric vehicles
Across the auto industry, manufacturers are pursuing a transition to electric, connected, autonomous, and shared mobility. Governments and cities have introduced policies that encourage the decarbonization of road transport, and the adoption of EVs has accelerated since 2020. Some major OEMs have announced that they will stop investing in new ICE platforms or end the production of ICE vehicles by a specific date.
To reach the net-zero goal, EVs would need to account for 75 percent of global passenger car sales by 2030. By 2035, the largest auto markets would need to be fully electric. McKinsey estimates that the global adoption of EVs (BEVs, plug-in hybrid EVs, and FCEVs) is lagging behind and will only reach 45 percent with the currently expected regulatory targets—far below what’s required to achieve net-zero emissions.
The good news is that the global EV market continues to heat up in spite of the COVID-19 crisis, which has seen car sales slump. Further, consumer demand may grow faster as electric cars become cheaper alternatives from a total cost of ownership perspective and given some incentives.
In Europe, achieving 75 percent EV sales by 2030 would have implications for the entire auto value chain. An estimated 24 new battery gigafactories would be needed to meet the local demand for passenger EV batteries, and some 15,000 public chargers and semi private chargers (those in multifamily homes) would need to be installed each week by 2030.
The new EV value chain in Europe would be worth some €91 billion as demand for low-emission power generation could boost supply. Renewable electricity production would need to increase by 5 percent to meet EV charging demand, and components for electrification would account for 52 percent of the market by 2030. Components for ICE vehicles would decline to 11 percent—about half the 2019 level.