Following the Covid shutdowns in 2020, the associated semiconductor shortages in 2021, and now the European conflict, raw material and fuel price increases, as well as wire harness stoppage multipliers, the European auto industry now requires a plan B, C, and D. OEMs operating in Europe that were content to undertake the bare minimum to follow a legal roadmap on the path to producing electric vehicles must now likely shift their plans to 2030, notwithstanding challenges. This new era of uncertainty suggests that OEMs should consider EVs sooner.
However, transitioning to that new period is not as straightforward as switching off a gas or fuel pump. A lead time is required by suppliers, rare earth miners, infrastructure businesses, utility suppliers, and so on. Nonetheless, this analysis forecasts a faster medium to long-term transition, with a 65% BEV new car market mix by 2030. This is a 5 point increase above the prior projection. Geopolitical turmoil has perhaps done more to promote electric transportation in the last four weeks than any Elon Musk tweet, flashy product launch, or 0-100km/h speed record in the previous four years.
Half-decade EU CO2 restrictions that give firms 40 winks before the next CO2 cut go into effect may have caught some manufacturers sleeping. Toyota, for example, may not have BEVs (yet), but it has spent extensively in profitable full-hybrids and has taken a far steeper long-term CO2 reduction trajectory. Furthermore, other OEMs, such as Tesla and Chinese OEMs, that aren’t faced with the difficult challenge of moving from a century-old business model to a new one within a decade are more likely to be nimble in the face of present market adversity.
During VW’s annual results call last month, Herbert Diess appeared to remark that they don’t need more demand for BEVs because they already had their hands full with overflowing order books. However, with ICEs possibly looking like stranded investments in certain ways in recent weeks, CFO Arno Antlitz stated on the same call that the business anticipates BEV/ICE parity to be achieved sooner than projected. According to Antlitz, ICE price increases, greater scaling benefits from BEVs as a result of the expanded Ford contract – licencing VW’s MEB technology – and the BEV scaling game might begin early.
The window from now until the next EU CO2 cut in 2025 (-15% target over 2020/2021 CO2 targets) was always expected to be the time to push those profitable ICE assets and use the earnings to support the transition to more EVs beginning in 2025. Porsche’s IPO may now be required to fill that void. When fuel costs fall again as a result of Russia’s attempt to sell its oil to markets like China or India, and Europe is left with the black stuff those markets have departed, like a revolving fossil fuel carousel, the question is whether the wind of change is still blowing or simply a gentle breeze.
Auto Trader, the UK’s largest automotive marketplace, is seeing a rise in customer demand for electric cars (EVs) on its platform, with the volume of enquiries for both new and used EVs reaching all-time highs in March. EVs currently account for a record one-third of all dealer inquiries. The problem is that many models are already sold out for 2022. In Germany, the loss of the so-called innovation bonus top-up in 2023 (with a maximum boost of €3,000 removed) has caused many BEV sections of dealer forecourts to resemble soviet supermarket shelves.
