European Union governments have decided there will be an electric vehicle revolution and have ordered their citizens to buy more EVs, but according to expert forecasts, they aren’t cooperating.
EVs are too expensive with limited utility compared with internal combustion engine vehicles. Europeans await a vehicle priced for the mass market.
That’s not to say the EV revolution won’t happen. Electric vehicle technology will indeed be an important part of the mix of choices for new sedans and SUVs for many years. Surely EVs will be a big hit when no-nonsense urban runabouts that cost say, €10,000 ($10,960), finally appear.
But the idea EVs can provide personal mobility with the same utility as internal combustion engines can be safely ignored, at least until new technology like solid-state batteries can bridge the gap with internal combustion engines.
Industry leaders like Stellantis CEO Carlos Tavares have said this was problem induced by politicians who think they know technology better than engineers.
“What is clear is that electrification is a technology chosen by politicians, not by industry,” Tavares said a couple of years ago.
The EU and the U.K. government require around 80% of new vehicle sales to be electric by 2030, but forecasts range now from under 40% to perhaps 60%. That represents a massive shortfall and may prompt some reaction from EU and U.K. politicians (Britain’s new government has said it will bring forward 100% compliance to 2030). Next year the step up, via mandated cuts in CO2 (carbon dioxide) emissions, imposes big fines on automakers who fail.
If these lower sales estimates are right, expect a European manufacturer financial crisis, followed by a political one. That might prompt action from politicians.
Meanwhile, European Parliamentary elections in June weakened Green and centrist parties, leading to speculation the EU’s 2035 new ICE ban might be diluted by the Commission. So far there has been little evidence to suggest that might happen, although some German automakers have urged action.
HSBC Global Research is the latest investment researcher to slash its forecasts and said, in a report, fines next year could reach €5 billion ($5,480).
“Slow and slowing EV sales momentum – mainly in Germany – drives yet another cut to our EU estimates. (We see) barely any volume growth for 2024 and a risk of missing CO2 emissions targets from 2025,” the investment researcher said.
Analysts say Volkswagen is the biggest potential victim.
HSBC cut its European EV market share sales estimate for 2025 to 17%, and to 38% for 2030.
European EV sales are currently at an annual rate of around two million and a market share under 20%. In the U.K., the government EV sales quota for 2024 is 22%, but sales are hovering at around 17%. Investment researcher Jefferies expects sales of 3.2 million (24%) in 2025 and 6.8 million (50%) in 2030. French automotive consultancy Inovev said EV sales would account for only 40% of the European market by 2030.
Will Roberts, head of automotive research at RHO Motion, expects an EV market share in Europe of 51% by 2030.
“As for the 100% target in 2035, we do not currently forecast this being met in the EU or the U.K.,” Roberts said in a recent interview.
Rho Motion’s latest sales data shows EV sales in Europe are stalling, especially in Germany, and said EU tariffs on Chinese EVs are likely to make this worse. EV sales in the 12 months to the end of July fell 8%.
HSBC outlined the drastic changes in the EV sales environment that prompted its drastic rethink.
“The downgrade cycle for EU EVs continues. (manufacturers) will miss targets. Persistent weakness in sales momentum, lack of new government incentives and the inflationary impact of import duties on China-made EVs, lead us to lower our expectations for electrification in Europe once more. Sales in Germany are down 20% through July 2024 and we expect EV penetration in the largest EU car market to decline two percentage points to 15% this year,” HSBC Global said.
“We also cut, more aggressively, our forecasts through 2029. Our powertrain forecasts imply carmakers will miss the EU CO2 emission targets in 2025, (and) we estimate fines could reach €5 billion,” HSBC said.
This change of direction has caused some embarrassing U-turns. Some big manufacturers like Ford, Volvo, and Volkswagen, earned virtue-signaling points by declaring they would stop selling new ICE vehicles by 2030. Now much of that has gone into reverse.
“The future is electric, but the past is not over,” said VW Group CFO Arno Antlitz at a Reuters conference earlier in the summer. One-third of product investment is allocated to keeping combustion cars competitive, Antlitz said. “It is a third and it will stay a third,” he said.
S&P Global Mobility described the upheaval in the EV market this way.
“As the novelty of EVs fades, the last several months have brought forth the realization that there are still fundamental issues that persist and need to be addressed for EVs to be a widely accepted solution. Some of these issues are the lack of charging infrastructure, long-charging times and the high initial cost of EV acquisition,” S&P Global Mobility said in a report.
“Most of these challenges are not short-term and will require years, if not decades to be fully solved,” S&P Global Mobility said.
How will the big manufacturers turn this around?
Ford has had a rude awakening but shows signs it may have the key to successfully riding the next round of EV development.
Earlier this year, analysts estimated Ford was losing $100,000 for every EV it sold, double the deficit from the previous year.
Ford CEO Jim Farley now argues that smaller, more affordable EVs are the way to go and says the new target market will be commuters and the urban role with smaller batteries and more limited range.
Unfortunately, his idea of “affordable” is $30,000, when this market really requires cheap and cheerful vehicles costing perhaps one third of that.
