October 16, 2019

Stratas AIM Scenario Analysis: ICE Bans in Lithuania

Nearly one dozen European Union member nations, including Lithuania, Denmark, Latvia and Bulgaria, are calling for a strategy to phase out traditional gasoline and diesel vehicle sales in an effort to reduce emissions and stave off climate change. During a recent meeting of EU environmental ministers, these EU member states proposed new rules that would allow member states to ban sales of traditional gasoline and diesel internal combustion engines by 2030. The proposal moves the decision power to the member state level, rather than the current bloc level. This proposal coincides with calls from Ursula van der Leyen, the new European Commission president, to make Europe the first emissions neutral continent by 2050.

In order to determine the effects of such a proposal, Stratas Advisors has utilized Stratas AIM (Automotive Interactive Model) to perform scenario-based analyses on such bans, with Lithuania as the test nation. Stratas AIM leverages historical data, macroeconomic inputs, fuel costs, and governmental policy, among other inputs, to forecast new registrations and fleet size and composition across 11 powertrains and four vehicle categories (light-duty vehicles, medium-duty vehicles, heavy-duty vehicles, and two-wheelers). Each of the input variables is customizable for such a scenario analysis, making Stratas AIM the ideal engine to perform this task.

In Stratas Advisors’ baseline scenario for the Lithuanian light-duty vehicle fleet, dieselization is expected through 2040. Diesel is expected to grow within the fleet from 31% in 2018 to 41% in 2040. Historically, gasoline has already started a decline that is expected to continue as consumers are making fuel diversification choices. In 2018, traditional gasoline vehicles occupied 63% of the fleet, with an expected decline to only 19% of the fleet by 2040. Broadly, electric vehicles (EVs), hybrid gasoline, plug-in hybrid gasoline (PHEV-G), and natural gas vehicles (NGVs) are expected to displace traditional gasoline. PHEV-Gs and EVs are expected to grow the most rapidly of these supplanting powertrains, growing 20% annually and 18% annually, respectively. Overall, PHEV-Gs will account for 7% of the light-duty fleet and EVs will account for 8% under the baseline scenario.

Source: Stratas AIM

 

Stratas Advisors implemented a scenario in which traditional gasoline and diesel new registrations are restricted by a 50% ban, using Stratas AIM’s ban by powertrain capabilities. This simulates a possible conditional ban that could allow certain types of light-duty vehicles such as rural or light-duty delivery vehicles to continue to operate on legacy fuels or could include sub-national bans in certain cities or provinces. Such a partial ban may be one method to move toward emissions reductions while allowing the population to move more slowly to alternative powertrains. In both the partial ban and complete ban (below) scenarios, the ban is proposed in 2020 and implemented in 2030. This delay allows consumers to move voluntarily away from the banned powertrains, capturing that consumer behavior prior to a binding ban in effect. With a partial ban on traditional gasoline and diesel, traditional gasoline vehicles in the fleet are expected to shrink at a faster rate, declining to 16% of the fleet by 2040, while diesel vehicles will account for just 29% of the fleet. Given the fleet dynamics in Lithuania, how long vehicles remain on the road and the intensity with which they are taken out of the fleet, it is expected that any sort of new registration ban would take a substantial amount of time for those vehicles to leave the fleet entirely. In this scenario, EVs are expected to jump to 11% of the light-duty fleet, and hybrid gasoline vehicles are expected to gain a fleet share of 19% by 2040. PHEV-Gs will also expand to 9% by 2040.

Source: Stratas AIM

 

By implementing a complete ban, proposed in 2020, Stratas Advisors is able to create a scenario in which there are no new registrations of traditional gasoline or diesel light-duty vehicles from 2030 onward while allowing consumers to make powertrain decisions with this in mind from 2020 through the ban’s implementation. As with the partial ban, the time from proposal to implementation creates a voluntary tapering effect that is consumer-initiated, rather than mandated by policy. Under a complete new registrations ban for traditional gasoline and diesel vehicles, diesel vehicles will account for only 5% of the fleet by 2040, and gasoline will slowly decline to 9% overall. PHEV-Gs and EVs will accelerate to expand market share to 15% and 18%, respectively. Interestingly, PHEV-Gs will have a more rapid growth rate (24% annually) than EVs (22% annually). Hybrid gasoline vehicles will grow to become to plurality, though not majority, in the fleet, comprising 29% of the light-duty fleet.

Source: Stratas AIM

 

As shown, a new registration ban for traditional gasoline and diesel vehicles, as advocated by over one-third of the EU member states, would have large impacts on fleet compositions and what fuels are demanded for transportation in the region. Even with an imposed embargo on new registrations for traditional fuels, demand for these powertrains will largely shift to hybridized versions and other liquid fuels, albeit with a growing, and appreciable, EV component.

For more information about Stratas AIM, the Global Automotive Service, and Stratas Advisors’ latest analyses, please contact Chris Brown, Manager of the Global Automotive Service.

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