When France recently announced a plan to ban gas and diesel vehicle sales by 2040 it wasn't met with the kind of fanfare a bold plan like that might have gotten a few years ago. It's bold to look beyond oil, but it's now feasible for some countries to do so and not rock the boat politically. And France may not even be a leader in its anti-oil push.
The Netherlands' lower house passed a bill that would ban gasoline and diesel car sales in 2025, Norway has a goal of going all-electric the same year, and Germany and India have thrown around the idea of going to all electric vehicles by 2030. But France's ban on gasoline vehicles after 2040 may be the one to take most seriously because of the country's size and location in the center of Europe.
Paving the path forward
Norway is currently the world's leader in EVs due to generous government subsidies. In 2016, 23.5% of auto sales in the country were plug-in vehicles and Tesla (NASDAQ:TSLA) once counted the country as its #2 market in the world. But Norway's population is just over 5 million people is very small compared to France's 67 million population. And France borders a half dozen countries in Europe who would invariably be impacted by France's ban, compared to Norway's isolated location.
If France follows through on its plan to ban gasoline and diesel vehicles it'll create a major market with the infrastructure needed to go all-electric. Auto manufacturing, charging stations, and sales channels will need to adjust. But when the government pushes an industry from the old standard to the new one there's no real way to go back. Look at a product like incandescent light bulbs, which dominated lighting for over a century. When the U.S. government planned to ban them it pushed the industry to CFL and now LED lights, which are the new industry standard, even after the ban was overturned.
France is also notable because it's the home of Total (NYSE:TOT), one of the biggest oil producers in the world. And as much as Total relies on oil, it is starting to look beyond oil for growth. It owns two-thirds of SunPower (NASDAQ:SPWR) and bought battery company Saft last year. SunPower has dominated France's residential, commercial, and island solar plus storage auctions recently, in no small part because of Total's help. And if the trend continues, SunPower may have a big growth market in France because of a push toward renewables, energy storage, and EVs and Total may have a future beyond oil.
European automakers could be pushed to compete with Tesla
This push to move beyond oil is notable for Tesla as well. One of the reasons Tesla is the most valuable automaker in the world is because investors think it will take a huge lead in EVs and never give it up. But the policy push to renewable energy and EVs in Europe could cause the incumbent auto industry to make the shift to EVs faster than they otherwise would have.
Volvo has already said all of its vehicles will be electrified by 2019 (which includes hybrids), and BMW, Porsche, VW, and almost every other European automaker is planning to increase production of electric vehicles over the next five years. 20 years from now, they won't want to be locked out of a large, regional market, and at the very least, I think they'll be pushed by their own governments to be big competitors to Tesla.
The point of no return
What makes country goals of banning gas powered vehicles notable is that it could push the industry to a point of no return. As more EVs hit the road, the charging infrastructure improves, and the cost of manufacturing for vehicles themselves fall. Tesla and GM are already making EVs that break the $35,000 barrier with over 200 miles of range, and we'll likely see a dozen more compelling EVs hit the roads in the next five years.
If public policy continues to tilt toward EVs in Europe, it could help shape the future of energy. And it could help make better competitors to Tesla.