In the age of BEVs, what about the ICE parc?

For understandable reasons, we hear a lot of talk about the growth of battery electric vehicles (BEVs) and the disruption that this will cause in the automotive distribution system – new and used car sales and aftersales.  ICDP is part of that process, and our extensive modelling over the last year or so has shown that when BEVs reach 50% of new car sales, with consequent growth in their share of used cars, repair and maintenance operations and crash repair, an ‘average’ European dealer will only be operating at breakeven.  This is the result of a lot of assumptions – that the margin on new BEVs will remain lower than ICEs as today, that maintenance intervals remain unchanged but work content and profit is lower (no oil change!), and that crashes remain more frequent and higher cost.

That is a lot to assume, as they could move either way.  As production cost of BEVs reduces, the margin pressure will be less (but will this result in dealers gasping in disbelief as manufacturers put margins back up…?).  It feels unlikely that the annual service interval recommendation can be sustained over time, although manufacturers will certainly argue that this is essential on safety grounds, and as BEV penetration increases, independent repairers will ensure that they are prepared to compete for this work more effectively than they can today.  However, my question today does not relate to the BEV part of the parc – it relates to the ICE powered part of the parc.

Last week, the European Commission proposed tough new emissions laws that would effectively ban the sales of pure ICE and ICE-hybrids by 2035.  The UK has slightly tougher targets that will ban sales of all but high performing hybrids by 2030.  Although the manufacturers are lobbying hard against this timeline, a number of brands have announced that they will stop offering anything but BEVs in Europe by 2030 including Ford, Opel and Volvo.  It is unclear whether the lobbying by other brands will have any effect on the views of the MEPs who have the final decision for the EU, but it is still clear that the transition will continue.  The last new car to be sold in Europe with an ICE could be 2035, though the reality is that the offer will decline progressively as we near the date of the ban, and the manufacturers fight to meet the fleet average emissions standards each year.

This still means that there will be customers buying new ICE cars into the 2030s, and with a current average parc age of over 11 years, they will still be a familiar site on our roads well into the 2040s, and still make up a meaningful proportion of the parc.  If you just glance around next time you are out on a drive and spot the cars that are more than 10 years old, that’s an indication of what you will see amongst all the BEVs – the latter including some which will be well over 20 years old including many Teslas, and the earliest Audi e-tron and Jaguar i-Pace.

The interesting question is how as an industry will we support this remaining parc of ICEs?  There will still be a lucrative parts business, and from a logistics perspective a part is a part, regardless of the powertrain of the car to which it is going to be fitted.  But at what point does a repairer – franchised or independent – conclude that the economics of maintaining and repairing ICEs no longer stack up?  Surely at some point, probably before 2040, you will stop training up new apprentices in the mysteries of the ICE?  Will diagnostics equipment still be supported into the 2040s, or will you have to keep an old laptop in the cupboard that still runs Windows 15 for when that ICE customer turns up?  (As a piece of motoring trivia, the diagnostics for the McLaren F1 only run on MS-DOS computers apparently, so this is a real problem, rather than an imagined one).  When will MOT test stations no longer be required to have emissions testing equipment – or will this be held only at a limited number of test centres, where the equipment and skills have been retained?  How many workshops will have engine hoists as opposed to battery lift tables?

There will be a tipping point, the reverse of what we see today at the start of the changeover, where BEVs become dominant and mainstream, and the economics of working on a reducing number of ICE cars force operators to either drop out or specialise in order to get a larger share of the shrinking cake.  This may not be today’s problem, but it will become real even whilst ICE cars remain on sale, as potential buyers will still want to know that they can continue to enjoy their new ICE car for years to come, and that if they sell, the residual value will not be destroyed by concerns about future support.  Perhaps the last years of ICE sales will see the best ever care packages – 10 years warranty and inclusive service?