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Pause for breath as West EU EV market screeches to a halt?

Babies learning to take their first steps inevitably take a tumble after making those first initial paces. In a similar vein, Europe's electric car market stumbled slightly in April. Having appeared ever more confident since European CO2 fleet average emissions increased in 2020/21 (95g/km NEDC cycle) – following 130g/km in the half-decade period before that – the market is showing its first growing pains, impacted by unseasonal headwinds.

Matthias Schmidt

European Automotive Market Analyst @ Schmidt Automotive Research

The new West European BEV passenger car market consequently rose from a BEV mix of just 2.5% in 2019 to 6.7 per cent in 2020 and rose to 11.2 per cent last year, increasing by over four times the mix achieved just 2-years previously. However, that rate has slowed during 2022, with the opening third of the year reaching 12.4 per cent.

April itself slowed to just 11.1 per cent. Yet the first month of the new fiscal year did suffer from some anomalies. Most notable were supply bottlenecks from the Groundhog Day-esque semiconductor shortage, as well as the Ukrainian wire harness impact halting production lines in March, impacting April deliveries.

A dramatic braking in the rate of Swedish BEV growth in April due to the high volumes witnessed last year, in-line with a rise in BEV purchase subsidies being increased in April 2021, boosting the previous year’s deliveries caused growth in the region to slow also. Rising raw material prices and shipping costs will likely feed into price rises over the next few months also – depending on hedging/contract deals – while some national automotive associations such as Mobility Sweden, are beginning to put pressure on governments to raise price ceilings for BEV subsidies to reflect price rises that are likely to be passed onto consumers and pricing vehicles out of subsidy boundaries. The Dutch €71 million new BEV car subsidy pot for 2022 (equivalent to around 21,000 new cars receiving €3,350 each) ran empty in the final days of May also. This will likely impact second-half deliveries negatively.

However, order books remain strong in Europe.

VW Group confirmed they have 300,000 BEV orders across Western Europe alone, with most models sold out for 2022, suggesting CO2 compliance is all but certain for Europe’s largest OEM, with some of those orders likely put aside to help 2023.

Source: Pause for breath as West EU EV market screeches to a halt?| Schmidt Automotive Research

With CO2 targets having been a critical stimulator of BEV supply up until now, all eyes will be on Strasbourg and the European Parliament‘s (EP) plenary between June 7th – 9th.

Amendments put forward by the Environmental Committee following the European Commission’s Fit for 55 proposals regarding CO2 emission standards for cars and vans, will be voted on and likely shift the CO2 goal posts. EU CO2 fleet average targets for 2030 and 2035 are likely to be altered – -55% over 2020/21 levels in 2030 (currently 37.5%) and a 100% reduction by 2035 which would be the de facto death of the ICE. Following the EP vote, the amendments would then be passed to the European Council, consisting of the 27 EU member states. 55% of the states (so currently 15 out of 27) representing at least 65% of the total EU population vote would have to pass it.

Germany has already said it will not object to the proposals. However, with most OEMs likely being on course by then, with many preemptively announcing ICE exits from 2028 onwards (likely in line with Euro 7 regulations), and consumer sentiment in Northern Europe appearing to be a driving force like never before, 2030 targets could be a mere formality.

The only stabilisers still required? The Alternative Fuel Infrastructure Directive (AFID) should take care of reliable and regular charging infrastructure. However, look further south and east, to regions that don’t have such deep-pocketed governments and where driving habits can vary greatly; these price-sensitive markets have offered a lukewarm reception to BEVs – except for the exception of Romania perhaps

(see January edition). Greece (2.7% Jan-Apr 2022 new car BEV mix), Italy (3.3%) and Spain (3.9%) still associate ZEVs with exotica rather than ubiquitous. Yet ripples on the radar have been registered. The budget Dacia Spring, for instance, commanded a top-two position in Italy’s new BEV registrations this year. While North European markets prepare to roll back subsidies, those Southern markets may have to wait for scaling benefits from its Northern neighbours, helping BEV’s price hurdle in the south.

Author

Matthias Schmidt

European Automotive Market Analyst @ Schmidt Automotive Research
Automotive Analyst with 15 years of experience serving the highest-ranking executives and decision-makers in and around the industry Member of @thefactory Berlin Automotive.

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