Source: Boston Consulting Group

A combination of hybrid and fully electric powertrains is predicted to halve the global market share of pure internal combustion engines (ICEs) by 2030. New research by The Boston Consulting Group suggests that ICEs will continue to play a major but changing role in the industry, as most electrified vehicles (EVs) over time will be hybrids.

Technology, regulatory mandates, and consumer cost of ownership are the drivers of the transition forecast to occur in three phases in the near-term.

In the first phase, ICEs will remain the dominant powertrain in the first phase, due to high EV prices and unattractively long payback periods based on total cost of ownership (TCO).

An increased market share for a mix of full hybrids (HEVs), mild hybrids or 48-volt hybrids (MHEVs), plug-in hybrids (PHEVs) and battery-powered electric vehicles (BEVs) is indicated during 2020-2025. In this second phase, OEMs will meet tightening fleet-wide efficiency and emissions standards, principally by incentivizing.

The third phase will be marked by rapidly increasing sales of all electrified vehicles, especially BEV. The per-kilowatt-hour cost of batteries is predicted to fall to between $80 and $105 by 2025 and to between $70 and $90 by 2030. This trend will be accompanied by increasing consumer demand based on TCO. The adoption of EVs for shared mobility vehicles will accelerate because their higher mileage will result in more rapid payback of the investment.

As a result, the share of pure ICEs will decline from 96 percent of the global market today to about half of all vehicles around 2030. Globally, the share of electrified vehicles will grow to about 30 percent by 2025 and approach 50 percent by 2030. The share of BEVs is projected to be 6 percent in 2025 and 14 percent in 2030.

ICEs will continue to be the powertrains of choice for most European consumers through 2025. Market development in Europe will be fairly evenly divided among electrified vehicle types, with BEVs taking a 17 percent share by 2030 and hybrids a collective 33 percent share.

A similar trend for the U.S. will be driven by the low cost of gasoline. Most of the EV growth will occur in smaller vehicle segments: by 2030, vehicles in the C segment will be almost entirely electrically powered, while ICEs will remain the primary powertrain for pick-ups. Hybrids will dominate the Japanese market, with a collective share of 55 percent by 2030.