The EU saw fewer new battery electric vehicles (BEVs) sold in the first seven months of this year than in the same period in 2023, according to figures from automaker lobby group the European Automobile Manufacturers Association (ACEA). And that is driving greater enthusiasm for the prospects of synthetic fuels, including a major role for those derived from green hydrogen, in the move towards zero-emissions light mobility.

No less an auto industry figure than Oliver Blume, CEO of both the Volkswagen Group and Porsche, said in late July that “one thing has become more and more evident: the transformation of the automotive industry towards fully-electric vehicles has clearly lost momentum and speed—the ramp-up curve is much flatter than originally assumed”. And ACEA’s data seems to back him up.

New BEV sales across the EU in the January–July period were just over 815,000 units, down by 0.4% from the same period last year, marking the first month where all-electric volumes have fallen behind last year.

In the wider 31 countries that make up bloc of EU and European Free Trade Association (EFTA) members plus the UK, BEV sales are still slightly ahead of last year—owing to strong 10.5% growth in the UK—but only by a marginal 0.6%. In short, Europe’s all-electric car sales are roughly flat to last year.

Interestingly, in a wider EU/EFTA/UK new car market that has recorded c.4% growth year-on-year up to July, gasoline, diesel and plug-in hybrid volumes have also fallen, by 2.4%, 8.4% and 0.4% respectively.

Almost all growth in European new car sales is being driven by hybrid electric vehicles (HEVs). These are up by 21.6% year-on-year and, at almost 2.4m units shifted thus far in 2024, are closing in on gasoline’s 2.76m as Europe’s most popular propulsion system for new car buyers.

HEVs’ popularity and the slowdown in BEV growth—although new EU regulations on the allowable average CO₂ emissions across a carmaker’s total sales starting from January may accelerate all-electric sales again next year—is getting the European automaking industry excited about long-term potential alternatives to Europe’s car sales going full electric.

In particular, electricity-based e-fuels, as well as biogenic synthetic fuels that can power existing and new internal combustion engine (ICE) and hybrid vehicles, are attracting significantly more attention.

“We think that there will be a very strong direction towards electromobility but, if it is possible to make a mix between synthetic fuels, combustion engines and traditional combustion fuels in the ramp-up phase it is very positive for climate protection" Blume, Volkswagen & Porsche

In e-fuels, green hydrogen is combined with CO₂ extracted from the air and converted into a liquid energy carrier. They offer some obvious advantages over BEVs, including allowing much of the fuel distribution networks developed for gasoline and diesel to be repurposed, rather than requiring new charging infrastructure to be developed from scratch.

They also allow for decarbonisation of existing ICE and HEV vehicles, many of which will be around long after the EU’s planned 2035 deadline after which only new zero-emissions vehicles (ZEVs) will be allowed to be sold in the bloc.

“We think that there will be a very strong direction towards electromobility but, if it is possible to make a mix between synthetic fuels, combustion engines and traditional combustion fuels in the ramp-up phase it is very positive for climate protection,” said Blume.

They also have the advantage that physical limits on green hydrogen production are much lower than for plant-based biofuels, which must compete for the land on which to grow with other uses. Availability of synthetic fuels could be an issue for their long-term role. “We will see, in 2035, if the production volume of e-fuels is enough to be able to change,” Blume cautioned.

There is another major boon for e-fuels in that they do not demand that customer behaviour changes. Drivers used to the routine of filling up their ICEs or HEVs with fuel at filling stations and the wait times involved will not be faced with the different pattern that recharging a BEV presents.

So, it is perhaps no surprise that European automaking executives are feeling positive about the future of e-fuels as consumer uptake of BEVs proves slower than forecast. “Our investment in synthetic fuels goes completely to the right direction,” said Blume, wearing his Porsche hat. “Why not renewable fuels, developing innovative, low-emission ICE and hybrid vehicles?” asked Luca de Meo, CEO of France’s Renault and current ACEA president.

But there is one major fly in the e-fuel ointment: cost. The challenge is largely self-evident: BEVs run on electricity; creating e-fuels involves generating electricity, electrolysis into hydrogen, CO₂ extraction and purification, then synthesis of this hydrogen and carbon into a liquid fuel. An e-fuel is always going to cost more than the electricity from which it is produced.

What, though, if Europe’s e-fuels could be produced from electricity that cost much less than power in Europe, enough to cover the costs of production and transport to Europe, making e-fuels competitive with charging BEVs within a European electricity pricing environment?

This may not be a pipe dream, especially as increasing demand for power in Europe—for mobility, heating, data processing and industrial processes—combines with the retirement of amortised conventional generating capacity, and their replacement with investment in renewable capacity that will also require additional load-balancing solutions seems likely to send Europe’s future power prices higher.

At the end of June, state-owned Saudi Aramco sealed a deal for 10% equity in a firm called Horse, which combines the ICE technology of Renault and China’s Geely, majority owner of Swedish automaker Volvo Cars. “Aramco's joining has given new evidence that setting up [Horse] had been, the right move, establishing the value of the thing at €7.4b ($8.2b),” said de Meo. 

As well as refining ICE powertrain solutions, Horse has a second goal of developing synthetic fuels. And, while Aramco has some interest in biofuels, its more obvious competitive advantage is in harnessing its home country’s abundant sunlight to produce cheap green hydrogen from electricity generation above domestic requirements, and then making and exporting e-fuels from this H₂.

Is a vision of green hydrogen produced in countries with a lot of sunlight and limited power demand, converted into e-fuel and shipped to Europe for use in its drivers’ cars realistic? Potentially, but it will likely need political support and/or subsidies to develop such a supply chain.

The good news for e-fuels backers is that gains for the centre-right European People’s Party (EPP) in June’s European Parliament elections could usher in a more supportive environment in Brussels.

“We see a significant risk of e-fuels being politically instrumentalised in the debate about the ban on combustion engines from 2035" Zipse, BMW

“The EPP advocates a technology-neutral approach to developing alternative fuels, hydrogen technologies, and new power trains for vehicles, aircraft and vessels. We support new sustainable liquid fuels since they can be used with the current refuelling infrastructures and supply chains,” its manifesto for the elections explicitly said.

But “it feels like, listening to the EU Commission president, that we should not expect too much for next year, if anything at all later on”, said Patrick Hummel, head of European auto research at bank UBS, of any sign that the EU is eroding its commitment to BEVS being, in effect, the ZEV solution for Europe.

This is a fear shared by Oliver Zipse, CEO at Germany’s BMW, who is particularly vehement that political support should not be limited solely to all-electric vehicles. ““Every ton of CO₂ we can save today, not some time in the future, counts,” he said. “This also entails demanding and promoting the use of low CO₂ fuels like e-fuels, E25 or HVO100 as quickly and as widely as possible.

“We see a significant risk of e-fuels being politically instrumentalised in the debate about the ban on combustion engines from 2035. There are currently many indications that the EU Commission is driving for a bogus solution, in which the ban on combustion engines is relaxed simply by ostensibly opening up to e-fuels. However, if it then does nothing to accelerate the ramp-up of low CO₂ fuels and make their use practicable, this would be a deliberate ban on combustion engines through the back door,” he warns.

Peter Ramsay is a co-founder and editor-in-chief of EV inFocus.

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Author: Peter Ramsay