The great electrification of transport: Unlocking efficiency gains

As the European Union accelerates its transition toward a more affordable and strategically autonomous energy system, few sectors embody both the scale of the challenge and the magnitude of the opportunity as clearly as transport. The transport sector consumes 47% of all of the EU’s oil demand, and given the lack of significant oil reserves[1], this is almost entirely imported from abroad. Electrifying this sector can considerably reduce the dependence on fossil fuels.

Of all transport modes, road transportation consumes the most energy by far, with 252.2 million passenger cars, around 30 million vans, 6.5 million trucks, and 721,000 buses, of which more than 95% are internal combustion engines (ICE) vehicles (figure 1). Electrifying this segment is a herculean effort that will take many years but will be highly impactful.

[1] According to Eurostat 2023 data, the EU imports 95% of its oil demand.

The EU’s CETO scenario[2] in figure 2 suggests that total transport energy demand could decline by roughly one-third by 2040, driven primarily by efficiency gains as road transport shifts from ICE to electric drivetrains. The core reason electrification in the road sector is so impactful in achieving energy independence is the superior energy efficiency of electric drivetrains versus ICEs.

Battery electric vehicles (BEVs) convert approximately 90% of electrical energy into kinetic energy, whereas conventional gasoline engines convert only 30% of the fuel’s energy into motion, with the remainder lost as heat. This means that every unit of energy shifted from fossil fuels to electricity yields large reductions in final energy consumption reflected (figure 2). Less energy consumption means less import of fossil fuels, which provides an improvement in strategic independence for the EU.

[2] The CETO scenario refers to the result of the European Commission clean energy POTEnCIA CETO 2025 scenario. For further reference, see this RaboResearch article.

The recent conflict in the Middle East has highlighted how vulnerable Europe remains to oil price spikes, since the Strait of Hormuz still carries a significant share of global oil exports. Shifting the energy demand in transportation modes to electricity produced within Europe strengthens energy security by reducing exposure to external supply disruptions and price volatility. Recent analysis from Ember’s shows that, in 2025, the EU avoided the consumption of 100 million barrels of oil per year due to its EV fleet, illustrating how electrification already reduces dependence on oil markets.

In the CETO scenario, energy consumption in the shipping sector decreases, albeit only to a limited extent. The main reduction in energy demand comes from the usage of on-shore power supply and the use of efficiency-improving technologies, such as wind-assisted propulsion by ships.

Rail demand is projected to rise, driven by the EU’s push to decarbonize freight and passenger mobility by shifting transport activity toward rail. In the CETO modeling scenario, the European rail sector is expected to see a 67% increase in activity by 2040 compared with 2015[3]. As rail adds more passenger kilometers and ton kilometers, its total energy consumption rises in absolute terms, even though its relative efficiency continues to outperform other modes. As passenger aviation activity increases with economic growth, its final energy use increases accordingly as its decarbonization pathway in the medium term would be through low-carbon molecules like sustainable aviation fuels, not electrons.

[3] According to the European commission estimates

Although we expect demand for electricity in the transport sector as a whole to increase, the dynamics within each sector will differ considerably, as introduced in the previous section. Some sectors will see a high share of electrification, and some will see no use of electricity at all based on the currently available technology.

Road electrification increases across segments

Passenger cars: A large fleet that slowly turns to electricity

Despite the rapid acceleration in electric vehicle uptake, a full phase out of ICE cars in Europe will remain a long-term process. In 2024, over 1.4 million new BEVs and around 800,000 new plug-in hybrid electric vehicles (PHEVs) entered the EU fleet. The trend is shifting positively, current registration data show that BEVs accounted for 17.41% and PHEVs for 9.44% of new EU car registrations in 2025, a strong increase from 2019’s 1% share. Despite this positive trend, the percentage of the total electrified fleet is still small relative to the passenger car stock, which exceeds 250 million vehicles. Even with robust growth in electrified sales, the stock shift is only gradual because renovation flows[4] are relatively small compared to the total stock.

[4] Number of vehicles that are scrapped or sold overseas that are replaced by electric vehicles.

This slow turnover means that the EU’s indicative CETO pathway is increasingly difficult to reconcile with market reality. According to the CETO scenario, to stay aligned with its long-term trajectory, the EU should already have had around 20 million BEVs and 9 million PHEVs on the road by 2025. Yet actual EV stock in 2025 stood at just 7.7 million BEVs and 5.06 million PHEVs.

In addition, a well-developed charging infrastructure is essential for the widespread adoption of EV passenger cars, as it directly addresses a key psychological barrier: range anxiety. RaboResearch estimates that if EU countries would follow an S-shaped adoption curve like Norway, it would correspond to adding roughly three million new public charging points by 2030, more than tripling today’s total of about 900,000. This would enable the EU to have 42 million EVs on the road by 2030. While in 2040, if there were 240 million EVs, as the CETO scenario implies, there will be demand for at least 17 million charging points, which highlights the challenge and opportunity for charging infrastructure deployment in the EU.

Fast charging infrastructure, in particular, plays a crucial role in reducing charging times to levels comparable with refueling diesel or petrol, helping to ease long distance travel and improve user confidence. To ensure the roll-out of this infrastructure reaches all European roads, supportive EU regulations, such as RED III, are crucial.

The increased demand of electrons could mismatch supply in the grids. Therefore, to somewhat alleviate grid congestion, co-location with batteries and dynamic pricing are vital as temporary solutions for the roll-out of charging infrastructure.

Road public transport: Driving rapid electrification

Buses and coaches remain the only transport segments broadly on schedule with the CETO electrification path towards 2040. By 2024, battery electric buses and coaches accounted for 23% of new EU registrations, marking a rapid acceleration from previous years. Although the total European bus fleet consists of roughly 720,000 vehicles, only a 4.7% – but fast growing – share is already electrified, with city buses driving much of this momentum. In Denmark, battery electric city buses have already overtaken diesel as the dominant drivetrain, with BEVs making up 51% of city bus fleet in 2025, the first time they surpassed diesel. Although some cities still have fleets of compressed natural gas (CNG), we see that registrations have stalled as the technology is not emission free.

City buses are a natural starting point for electrification for two structural reasons. First, their routes and duty cycles are highly predictable, enabling operators to plan charging schedules efficiently. Second, they accumulate high annual mileage, making it easier to capitalize on the lower operating and fuel costs of electric drivetrains compared with diesel. Coaches represent a harder to decarbonize segment. Their longer routes require larger battery packs and a more dispersed charging infrastructure. The city bus market is likely to meet the scenario envisioned in CETO of 87% zero-emission buses, however structural challenges for coaches remain. The capacity of the sector to overcome these challenges will determine whether the fleet will achieve 87% of zero-emission buses as projected in the CETO scenario by 2040.

Road freight transport: Economics point to electrification

Light commercial vehicles: BEVs rise as result of improving economics of use

In the N1 segment – light commercial vehicles (LCVs) below 3.5 tons gross weight – electrification is progressing, but at a more measured pace compared with buses or passenger cars. The data shows that battery electric LCVs have steadily increased their share of new registrations, rising from just over 1% in 2019 to nearly 9% of new registrations by 2025, indicating a clear acceleration in uptake. Meanwhile, LPG- and CNG-powered vans continue their long-term decline. PHEVs, although still having a marginal share, show a slight uptick only in the most recent years. This shift in the flow of new registrations is gradually reshaping the fleet composition: The BEV share of the total LCV vehicle stock climbed from around 0.4% in 2019 to more than 1.3% by 2024, reflecting rising sales.

Electrification in the LCV segment is structurally more challenging than in city buses, largely because vans must serve a wider range of operational profiles, often with variable routes, payload requirements, and dispersed charging availability. Nonetheless, for many urban and regional delivery cycles, BEV vans already offer compelling operational economics measured in total cost of ownership (TCO), which analyses the total cost per km of using an LCV, particularly where daily mileage is high and predictable electricity’s lower per kilometer energy cost becomes an advantage over other technologies.

However, as zero emission zones expand across European cities, the LCV market is positioned for a more decisive shift. The steep rise in BEV registrations toward 2025 visible in the data, suggests that the segment may be on the cusp of faster adoption.

Medium and heavy commercial vehicles: BEVs increase their share from a very low baseline

In the heavy duty vehicle (HDV) segments (commercial vehicles above 3.5 tons gross weight), electrification is beginning to accelerate meaningfully. The share of battery electric trucks in new registrations has risen sharply since 2023, climbing from a share below 0.5% to more than 4% of new HDV registrations by 2025, marking the strongest growth trend among all alternative drivetrains in this segment. The implementation of hydrogen trucks, by contrast, remains nascent. CNG and liquified natural gas (LNG) trucks show fluctuating, but overall declining, trajectories in new sales – highlighting how gaseous fuels are losing competitiveness as logistic companies prioritize zero emission platforms. This shift in new registrations gradually feeds into the stock composition: The share of BEVs rose to 0.4% of the total HDV fleet in 2025.

The decarbonization challenge of the trucking sector is a complex structural issue: Regional logistics are at play and payload constraints, range requirements, and depot charging limitations remain significant bottlenecks. Nevertheless, the steep rise in BEV uptake visible in the 2024-2025 period, suggests that the market is entering its first genuine scaling phase. This is likely driven by the introduction of next generation electric trucks with improved battery densities, expanding megawatt charging infrastructure, and a TCO that, in regional freight, is starting to favor electricity.

Rail transport: The first mover in electrification

In the rail sector, the electrification profile is markedly different: It is already high. Electric locomotives[5] account for just over half of the fleet, while the remainder continues to rely on diesel – a pattern that has remained relatively stable since 2019. Railcars[6] show a much higher degree of electrification (three quarters of the fleet). The main limitation to expanding the electric share of the fleet in rail transport further is the incomplete electrification of the European rail network. Large portions of secondary, rural, and cross-border lines remain unelectrified, and the capital expenditure required for the catenary installation (the infrastructure that delivers electrical power to trains), slows the progress. This is particularly relevant for freight, where routes often rely on diesel traction to maintain operational flexibility across networks with mixed electrification rates (for example in the Baltics where the locomotive fleet is 100% diesel).

[5] Defined as all railway vehicles with a power engine of 110 kW and above

[6] Defined as railway vehicles with a motor constructed for the conveyance of passengers or goods by rail with an engine below 110 kW

At the same time, the dominance of diesel and electric drivetrains, and the absence of alternative fuels like hydrogen, LNG, or biofuels at scale, reflects the unique economics of rail. Trains require very high power delivery and compatibility with existing infrastructure. These characteristics favor electric traction, where overhead lines are available, and diesel where they are not. Emerging technologies such as battery electric and hydrogen trains remain limited to pilot deployments, as their energy density, range, and refueling or charging logistics are not yet competitive for most commercial operations. As a result, the rail market continues to revolve around a binary energy model: Electricity where infrastructure exists, diesel where it does not.

We expect electrification to increase modestly until 2040 in this segment, as EU member states focus on reducing emissions and modal shift. This is because although only 60% of the European rail network is electrified, 80% of the traffic runs on these lines. The modal split will begin to shift more meaningfully as Member States focus on accelerating rail network electrification, or as alternative propulsion technologies mature.

Aviation and maritime transport needs molecules, not electrons

Energy density and long-range capability is vital in aviation and maritime transport, making these transport modes fundamentally different than road and rail. These characteristics make direct electrification economically unviable or not possible with today’s technologies. As a result, the decarbonization pathways for aviation and maritime transport will rely far more on energy-dense liquid fuels, particularly biofuels, rather than batteries or grid-connected systems.

In aviation, Sustainable Aviation Fuels (SAFs) remain the central lever for emissions reduction. SAFs are biofuels derived from used cooking oil and animal fats or other sources of biological feedstock. The maritime sector is pivoting toward bio-derived fuels, such as bio LNG and bio methanol, supported by the FuelEU Maritime regulation, which promotes renewable and low carbon fuels as the primary decarbonization route for ships[7]. Unless we see a breakthrough improvement in the energy density of batteries, we believe electrification will be marginal in these segments until 2040. Therefore, aviation and shipping will continue to decarbonize through green molecules in the next 10 to 20 years.

[7] With the exception of short distance ferries that can be electrified

The CETO projections for transport electrification by 2040 indicate a six- to tenfold increase in electricity demand from transport (mainly road transport) versus 2020, but these estimates should be interpreted as directional rather than deterministic. In addition to CETO, the European Commission has developed other modeling scenarios to project future demand for electricity from the transportation sector (figure 14). Looking at these scenarios, we can conclude that, no matter the scenario, electricity use from mobility is expected to rise well above today’s levels. Passenger vehicles will become the primary driver, while LCVs and HDVs will begin to add a meaningful new load to the system.

Based on the scenarios, the transport sector could lift electricity demand in the EU between 16% (LIFE) and 27% (CETO) by 2040, compared to 2020. This equals an additional electricity demand from transport of between 3,209 TWh (LIFE) and 3,487TWh (CETO) by 2040 versus 2023. In 2023, all sectors in the EU combined consumed 2,749 TWh of electricity.

Such an outlook underscores a central challenge for the coming decade: Ensuring that the EU’s power system can accommodate a substantial increase in load - additional electricity demand will also be driven by other sectors, for example data centers. On the delivery side, the emphasis is in charging infrastructure, where the ecosystem has to grow to accommodate the new fleet of electric vehicles that will demand electrons.

According to estimates from the EC, around EUR 700bn annually will need to be invested in equipment (vehicles) and charging infrastructure to reach the 2030 targets. Achieving the expectations for 2040, as included in the CETO scenario, will likely require similar investment efforts in the decade from 2030 to 2040. The deployment of this capital will rely on three levers:

1. Economic viability: TCO advantages in heavy-duty trucking and the upfront price and financing of passenger vehicles should improve. The introduction of mass market EVs in the EU, lowered average BEV prices by 4% in 2025, according to Autovista Intelligence Germany. The reduction in the cost of purchasing BEVs in all segments will likely continue to fall driven by the increase of economies of scale and a constantly declining battery price.
2. Infrastructure readiness: Public charging station utilization rates indicate there is still charging space for new EVs, yet the number of charging stations must continue to increase to accommodate future demand. A critical point will be grid infrastructure congestion, which can be a challenge to ramping-up infrastructure deployment.
3. Technological improvements: In battery technology, both in energy density and higher voltage architectures have improved range and charging speed of EVs, with a stable improvement path this lever will provide tailwinds to the increased adoption of EVs.

Policy support can, in turn, positively and negatively impact each of the three levers.

With two out of the three levers improving, reaching the electrification levels envisioned in the European Commission scenarios remains challenging but not impossible. Reaching the outcome depicted in the CETO scenario seems too steep at the moment, though, but the market does continue to expand. And, with geopolitical tensions increasing oil prices and price volatility, electric mobility adoption might increase sharply.