The World Rally Championship (WRC) used to be one of the most iconic motorsports, second only to Formula 1 for public attention, in Europe at least. But the race series has fallen from its former glory more recently. WRC has just hosted its annual race weekend in Finland, the spiritual home of rallying, so I talked to the team about how the sport could remain relevant in a world where sustainability is becoming central for automotive technology.

“When we took WRC over the former promoter had some financial issues,” says Jona Siebel, WRC Managing Director. “In the last 10 years, with a strong management team, we built up the business.” The efforts are succeeding. WRC had 1.7 billion impressions across all social media platforms in 2023, with over 600 million video views, and the Finland races net around 30 million Euros alone with over a hundred thousand paying spectators coming to the city of Jyväskylä, where it takes place.

Not Going Electric

However, with sustainability becoming globally front and center, the FIA now produces an annual report and has defined goals for its accredited series. WRC has tried to do its bit, but this didn’t involve going all electric, unlike World Rallycross, although the latter has now created a unique competition where electric is competing against combustion. Instead, WRC has opted for a hybrid drivetrain, using sustainable carbon neutral fuel from P1.

“We absolutely saw Rallycross as an electric platform, because it’s short, sharp, and you can easily charge the cars,” says Siebel. “But with WRC we would have had to completely change the basis of the sport to make it all-electric. We decided we didn’t want to do that so we chose a different technology that we think can still showcase the sport without changing it.”

There’s no sign that WRC will be going all-electric anytime soon, either. “We will drive with a hybrid system with our three existing manufacturers (Toyota, Hyundai and Ford) for the next two years, 25 and 26,” says Siebel. “For 27 onwards we need more cars. The fact that the whole automotive industry is in a big transformation process, and nobody knows exactly which technology will be relevant in a few years, doesn’t help.”

“Everyone was saying everything will be electric,” says Martin Popilka, CEO, P1 Fuels. P1 became WRC’s sustainable fuel partner in 2022, alongside providing the fuel for FIA Karting. “Now the tides are slowly changing. We use the WRC as a laboratory. We started off with 100% sustainable fuel. We’ve released the new evolution of our fuel in collaboration with the car manufacturers and the FIA taking into consideration learnings from the previous year of running. We released that fuel this year at the WRC Portugal event. We improved a lot of combustion characteristics, which are super relevant for making sure that these fuels will run very well in any passenger car. We’re already working now on a third evolution.”

Responding To A Softening Demand For EVs

Siebel claims the focus on sustainable fuel rather than full electrification reflects recent changes in the market. “Two or three years ago, the answer we got from most manufacturers was that it was electric or nothing,” he says. “We proposed an experimental class to offer something additional to our current concept, but the feedback was zero after that. In the meantime, we started using sustainable fuel. It’s the first World Championship ever to do this, since 2022. In addition, we have a plug-in hybrid system. Now the world is changing because full electrification is running most of the manufacturers into deep trouble. I’m living in the north of Germany. If I drive two hours, I see lots full of Chinese electric cars nobody wants to buy. At the moment the answer is not fully electric.”

All-electric car sales in Germany were down 16.4% in the first half of 2024, thanks to a 41.6% fall in Tesla sales. But BYD’s sales were up 427%, and the picture isn’t the same across Europe. According to Britain’s Society of Motor Manufacturers and Traders, UK battery-electric vehicle (BEV) sales were up 9.2% year-on-year for the first half of 2024, rising to 16.6% of the market, and across all 28 European countries they were up 2% on average, according to JATO Dynamics. Chinese-made BEV sales actually grew from 13.1% in 2023 to 18.2% in the first half of 2024. So Siebel’s comments may reflect Germany, but they are not true for Europe as a whole.

“We are offering both worlds,” argues Siebel. “That means we have full sustainable fuel and hybridization, which will be the future for at least two thirds of the car passenger car markets, until 2045. Even Akio Toyoda said by 2035 only one third of cars will be fully electric, so what to do with other two thirds? We have the answer. We have full sustainable fuel plus hybridization. Once pure electrification is ready to get enough range, power, and safety, maybe we can run both alongside. But for 2027 we will take a conservative approach with sustainable fuel, plus some electrification, at a lower price. We can see the automobile automotive industry turning back again – maybe not necessarily away from EVs but certainly not going at as full pace towards EVs. Hybrid will remain a critical part of every automobile company’s inventory for an increasing amount of time, even more than what we estimated back in 2019. It’s a market situation.”

“In Australia, there’s not a move towards EVs at the moment because of charging infrastructure and the distances that we drive,” says Simon Larkin, Senior Director Events, WRC. However, EVs still accounted for 8.3% of sales in Australia in June, compared to 8.8% in June 2023, so there is significant interest, even the market share has fallen a little and hasn’t matched European levels yet. “There is no 100% solution for everything. I still believe EVs are the solution for commuting into cities. But if people want to enjoy motorsport, even in Formula One, it will be full sustainable fuel.”

Can Sustainable Fuel Really Gain A Mass Market?

However, even P1 doesn’t expect its fuel to go completely mainstream, although it has already shown commercial potential outside pure motorsport. “We decarbonize privately owned Formula One engines, such as for Sebastian Vettel, as part of his Race Without Trace campaign,” says Popilka. “All those cars decarbonize without any modification of the engine, which is ultra challenging, because the Formula One engine is very picky, so convincing those engineers that P1 fuel runs without any problems was great. But we decided to focus on bringing this to passenger cars, because this is the ‘aha’ moment. Everyone will believe that you can run a bespoke fuel in very contained conditions with a lot of engineers at a racetrack in a Formula One engine. But what we want people to know is that they can all run the fuel in their cars without doing anything. Just change the fuel and reduce greenhouse gas emissions by up to 95%, which is far more important to us than a single race championship.”

The P1 fuel is a blend of green hydrogen and bio methanol from OCI to make a carbon neutral blend. “The thing about green hydrogen is that even the facilities that are live now are failing to commercialize that green hydrogen due to its costs,” says Popilka. This is the reason for P1’s use of bio methanol as well as hydrogen. “We’re able to take that green hydrogen and convert it into a very high margin, high quality product, ie gasoline, which has instant commercial potential – all the cars on the roads. However, we’re currently targeting premium and vintage cars, because we know that we’re still not at price parity with fossil fuels. That’s an instant market that we have a lot of. We have so much customer demand we can’t meet. That’s how we collaborate with the green hydrogen facilities that are online and struggle to sell the green hydrogen.”

P1 doesn’t expect its sustainable fuel to compete with mainstream petroleum products anytime soon, however. It will remain targeted at this premium market. “Our aim is to get to around 2.50 Euros per liter, or at least below three Euros, by 2026,” says Popilka. “That already brings us to a mass market product. Today, we’re commercializing at a higher price point for racing of around five Euros per liter. That’s about the same as fossil racing fuel. That’s why we’re quite successful in this market, because people do want to do the right thing and either racing is part of the solution or part of the problem. We don’t believe any championship has an excuse not to run sustainable fuels.”

Solving The Climate Crisis With Hybrids And Sustainable Fuel

“When you look at the transportation industry, CO2 emissions are about 20% of greenhouse gas emissions,” says Popilka. “If you drill down into where the CO2 emissions are coming from within the transportation industry, it’s not aviation fuel – that’s 10% of CO2. It’s not international shipping either. That’s also 10%. In fact, 48% of all CO2 emissions in the transportation industry, the largest polluting sector, are from passenger cars, trucks and vans. So that is the segment that needs decarbonization the most. The common misconception is that we need to decarbonize aviation first, and passenger cars will disappear because that will be electrified. The fact is that electrification, as important as it is, is delayed. It’s not going to happen as swiftly as we all assumed. That’s what we’re hearing from all the car manufacturers. There’s not one car manufacturer that hasn’t changed their strategy in the last year.”

That is true for incumbent automakers, but not Tesla and BYD, which remain all in for BEVs. In fact, Chinese brands in general are still betting big on BEVs, with 97% of car buyers in their market planning to buy electric. In contrast, the World Rally Championship is clearly continuing to back combustion and sustainable fuels, to satisfy most of the market, which remains non-BEV. For a few years, it looks like this will remain a viable decision. But assuming BEVs aren’t the future is risky. There may have been a softening of the growth in BEVs this year, but the technology is still developing fast. It has come a huge way in the last four years, and the pace is not relenting. The 2027 regulation update might be the last time WRC can stick with combustion and remain relevant to what people actually drive on the road.