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The decline in sales of electric vehicles in Europe is painful evidence that the market is not ready to stand on its own, serving as a warning to governments in the region that more support is needed until affordable electric cars become a reality, Bloomberg writes.
A glut of unsold electric models is already causing port congestion as factories cut production — a warning about meeting the region’s climate goals and the risk of Tesla-style job cuts.
Without subsidies, the cost of acquiring and owning an electric car already makes sense for many drivers. Insurance and repairs are more expensive than internal combustion engine cars, and many potential customers still cite the lack of a well-developed charging infrastructure as a major concern. At the same time, rapid technological advances and Tesla’s price war are causing the resale value of an electric car to plummet, making matters worse.
“We are losing momentum,” admits Matthias Bergmann, chief executive of industry group Mobility Sweden, with sales in Sweden falling by nearly a fifth in the first quarter. “The market is no longer growing and the share of electric cars is actually declining,” adds Bergmann.
It is too late for the industry to turn back the clock. Volkswagen, Mercedes-Benz, Stellantis and other carmakers have invested billions of euros and are now struggling to build new models as demand weakens. Last month, sales in Europe fell 11% year-on-year, turning the entire market in the opposite direction, as Germany, Sweden and Italy saw EV registrations drop by around 30%.
Changes in incentives are a major reason for the turnaround. Germany, seeking austerity amid an unprecedented budget crisis, abruptly withdrew its subsidy program late last year, leading to a drop in electric car sales in December.
In Sweden, one of Europe’s fastest electrifying car markets with a 39 percent electric car share in 2023, the government ended incentives and then cut fuel taxes, making combustion engine cars even cheaper by comparison with its battery analogues.
“People just don’t earn enough to buy these cars,” points out Laurent Favre, CEO of French auto parts supplier OPmobility. “There is a gap between demand and supply and it is normal that subsidies are not eternal. Reality is catching up with us,” he adds.
Governments in the region are still trying to fix this. Italy is considering a grant of €13,750 for the purchase of electric cars for low-income families. In France, President Emmanuel Macron’s provision of cheaper electric vehicle leases for poorer households is wildly popular.
In the UK, the House of Lords said in February that it was “hasty” for the country to end the subsidy for private buyers in 2022. Since then, sales of electric cars have stabilized as a share. New targeted subsidies are also expected to be reviewed.
“The subsidy was removed too early,” said Andy Palmer, interim chief executive of charging infrastructure company Pod Point and former head of Aston Martin Lagonda Global Holdings Plc, with consumers reluctant to spend more on electric cars, especially when charging stations are not available. sufficiently widespread. “If you want to accelerate adoption (of electric cars), you have to lower the price of the cars, you have to put the cars in that $20,000 to $30,000 bracket,” Palmer points out.
The rate of decline in EV sales in Germany eclipses the overall decline in Europe. Graphics: Bloomberg
Months after acquiring a Mercedes EQB, England-based Naeem Badyuzaman says he is ready to trade in the car, which he bought with the help of the company’s incentive program. A shortage of charging stations results in daily 45-minute waits in line for a device. When his two-year contract expires, Badyuzaman plans to switch to a hybrid.
“I wouldn’t recommend an EV to my family or friends right now,” he says. “For the price of a base electric vehicle, you have a wide range of slightly more premium petrol cars.”
Such views are shared by the wider public and are bad news for Europe’s ambitious plan to phase out sales of new cars with internal combustion engines by 2035. Carmakers have begun lobbying to soften or delay the plan, and for interim regulations.
However, the electrification of road transport is highly politicized and ill-conceived measures can backfire. The yellow vest protests in France in 2018 against increased fuel taxes brought the country to a standstill regarding the transition to electric mobility. In the UK, the expansion of London’s ultra-low emission urban zone has sparked acts of vandalism.
Germany’s far-right Alternative for Germany party has condemned the forced phase-out of internal combustion engine cars, an issue that could feature prominently in the upcoming September elections in the states of Thuringia, Brandenburg and Saxony, where the party leads in opinion polls.
“Consumers in Europe are lost right now because governments change the rules on EV subsidies too often,” said Alexander Marian, partner and managing director at consultancy AlixPartners. “What is badly needed is some continuity in the rules in the run-up to 2035,” he adds.
Source: investor.bg
