Q4 storm saw W-Europe’s BEV market record new highs

Anyone familiar with a wood-burning stove has no doubt become accustomed to the slight panic of seeing the initial ferocity of the flames dwindle following the fire's combustion of both firelighter and kindling. Left with the conundrum of adding more fuel, or remaining confident that the slow-burning stove has amassed enough energy to reach that crucial infection point where the stove radiates with little more effort, is a similar position many European governments currently find themselves.

Published

February 2023

Industry

Electric Vehicles

The Norwegian government, home to the world’s largest sovereign wealth fund, was the first to get the BEV ball rolling – perhaps as an offset to all that oil drilling – back in the previous decade when just a handful of models were offered, which notably included the homegrown TH!NK city model.

The wealthy Nordic market, which can now count every fifth car in circulation on its roads being a pure electric model (see page 13), never stopped pilling vast amounts of fuel (tax breaks) onto the BEV market.

However, the first tangible signs that Norway is prepared to reel in those crucial fiscal advantages are just around the corner.

From 2023 a 25% VAT rate for the value of new BEVs priced over NOK 500,000 (€45,000) will be applied for the first time – causing a rush to dealerships at the end of 2022, resulting in Norway recording the highest year-on-year monthly growth rate (137.2%) during the final month of 2022.

It was perhaps unsurprising then that BMW‘s pricey IX model, which starts at over €75,000 in Germany (Norwegian prices currently ‘under review’), was a top 5 model in Norway in 2022, the IX’s largest European market.

However, with the government already putting a 2025 sell-by date on ICEs, a rebound effect towards petrol/diesel models is off the table but will likely result in a general slump in the new car market in the opening months of 2023.

In addition, the government in this non-EU state – but conveniently counting to the EU CO2 fleet average targets – will also apply a NOK 12.5 (€1.10) per kg weight penalty tax for each kg over 500kg curb weight, resulting in a stealthy tax to generate large amounts of cash in a market that last year witnessed a record-breaking 79.3% mix of its new car market accounted for by heavy pure electric cars.

However, while Norway is well and truly on its way to a 100% electric car market, if other markets react too hastily, with ‘at least’ a decade wait until a defacto ban for diesel and petrol cars is likely to be rubber-stamped by the EU later this year, BEV adoption could be set back a few years.

All eyes will be on Sweden and the UK this year as test cases.

Both markets scrapped purchase subsidies entirely in 2022 – although generous tax savings remain for company car drivers. With order backlogs considered, the first results of these policy adoptions should become visible during this year’s second quarter of 2023.

The most exposed to these reductions or removals of BEV subsides, Tesla, was the first to react.

Slashing prices at the start of the year, in a fine-tuned manner, to qualify vehicles for various subsidies still around by strategically dropping prices into various price boundaries to squeeze out the most financial help from various governments.

The Tesla pricing strategists have certainly done their homework!

One such case is Germany, where, like a top-class limbo dancer, the new pre-tax price of the Model 3 and Y now both fall under the lower price boundary bar – qualifying for a maximum government-supplied subsidy of €4,500 – by less than €50.

However, other OEMs may not be keen to go beyond their CO2 obligations if they are left footing the bill, and thanks to current healthy order backlogs, they are unlikely to make any price reductions until further into the year when they have more supply.

During 2022, thanks to that last-minute Norwegian delivery boost, that saw its total plug-in market rise to 88.5% (with PHEVs included), its BEV mix remained twice as high as the next market, Iceland, with a 35.1% BEV new car mix.

Meanwhile, Germany, the largest BEV volume market last year (471,000 new units), which accounted for 30.7% of the total region’s volume, is reducing the heat that it’s been supplying to the BEV market, reeling BEV purchase subsides in from 2023 to more modest levels with the maximum purchase subsidy reduced by €1,500 to €4,500 during 2023.

This resulted in a significant pull-forward in registrations during December seeing German BEV volumes account for every third new passenger car (33.2%) entering its roads during the same month.

While private consumers will continue to benefit from subsidies for a while, German company car drivers’ subsidy days are numbered, with handouts wiped away from autumn 2023, which could be a blow for a market that sees roughly every second BEV registered to non-private buyers. It could also cause another stampede to dealer forecourts in the usually quiet summer period.

Key monthly benefit-in-kind tax benefits remain however.

With wealthy North European countries, where the vast majority of BEVs end up – 93.4% of 2022’s new West European BEV registrations entered markets north of Spanish, Italian, Portuguese or Greek borders – looking to sure up their household budgets, 2023 is looking to be a test case scenario if the BEV flames can continue burning with fewer or no government handouts at all.

While fiscal benefits for company car drivers remain, these clandestine benefits will be more important than ever in propping up demand.

With the EU CO2 fleet average emission target still in focus, traditional OEMs can’t afford to take their foot off the accelerator and will likely have to swallow some price cuts once order books thin out.

So for this reason, our BEV forecast for 2023 remains stable (page 5) with possible price cuts in the second half of the year, keeping those home fires burning!

More in-depth reporting in the full study published each month. The study now also features an in-depth look at the Chinese OEMs as their European expansion slowly begins. Are Chinese OEMs really a threat to the established European OEMs and what does the outlook look like?