The European Parliament voted to ban the sale of fossil fuel-powered cars by 2035 in March this year and the British parliament passed similar legislation in 2020. This will undoubtedly impact everyone from investors and car manufacturing executives to ordinary road users.


N1G’s blog has previously covered the fate of the car industry during the Covid pandemic as well as the boom in used car trading and the subsequent IPOs of second hand car sales platforms. Below is an overview of the potential risks and opportunities for existing car manufacturers.


In Europe and the US, the future – or at least the present – is electric, with electric vehicles (EVs) and hybrid fossil and electric cars (PHEVs) being the main alternatives to the conventional combustion engine. A lot of ink has been spilt on the merits of electric engines versus hydrogen fuel, but for now EVs appear to be winning.

Tesla is the market leader in EV sales. Tellingly, the company was founded explicitly to produce electric cars and its leading position illustrates the late arrival of the established carmakers on the EV stage. Founder Elon Musk deployed an unusual – but so far successful business model – of starting out with a luxury sports car. This enabled the company to focus on innovation and quality rather than quantity and scale, while still generating sufficient revenue for future models. The next stage was the current mid-market models – possibly to be followed by entry-level cars once the right facilities are in place. Part of the reason for Tesla’s success is their vertically integrated business model – meaning that they do not need to source vital components from third parties. The notable exception is batteries, although Musk’s company is currently piloting in-house production of cells too.


Initially being a very niche luxury car manufacturer, the competition was to a large extent taken by surprise as few expected Tesla to enter the mid-range segment and be as successful as it turned out to be.


Not all traditional car manufacturers are equally ill-prepared for the electric transformation and some are even making good sales from their EV ranges. The company with the third-highest number of hybrid cars is in fact the Volkswagen Group (which, apart from VW also incorporates Skoda and Seat and high-end brands like Bentley and Porsche). For fully electric vehicles though, the group tails behind Tesla and Asian carmakers – mainly Chinese. One of these (SAIC-GM-Wuling) is a joint venture between American giant General Motors and two Chinese companies. Manufacturers such as Ford, General Motors itself, Toyota, Honda and Stellantis which are the largest producers of petrol and diesel cars are remarkably absent from the list.


This is not to say that they do not produce EVs – most of them do, but rather that they have failed to dent the market dominance of Tesla, BYD (a Chinese manufacturer), SAIC and the Volkswagen Group. The German-headquartered group stands out as the only of the traditional leading car manufacturers that is doing well on the EV front.


This begs the question of what will happen to the likes of Ford and Toyota when sales of new petrol and diesel cars are banned. Among entry-level models, there appears to be more room for competition and this will perhaps prove to be the saving grace for them. Among top and mid-range products though, Tesla looks set to remain the market leader.


Things could still turn out quite differently. If EVs get serious competition from hydrogen, the future would look less bright for Tesla – and more positive for traditional manufacturers, if they were to adapt quickly to producing the new engine types. Alongside hydrogen sits green diesel, which has the advantage of being useable in normal diesel engines. With the impending ban on fossil fuel engines though, this is not an actual advantage. Readers in Sweden may remember bioethanol or E85 fuel, which was hailed as the future of green driving in the early 2000s. Despite the government ordering fuel stations to install E85 pumps, there was no significant uptake in E85 car ownership.


The future may, then, be electric, hydrogenous or something altogether different. What do you think your car will run on in ten years? And which make will it be?