The new normal is the abnormal, but are EVs set to benefit?

OEMs operating in Europe, happy to do the minimum to follow a legislative roadmap on a route to introducing electric models, must now likely alter their course to 2030 with headwinds battering those plans. This new era of uncertainty would suggest OEMs should turn to EVs earlier. However, to move to that new epoch isn’t as simple as turning off a gas or fuel pump. Suppliers, rare earth miners, infrastructure companies, utility suppliers etc. all need a lead time.

This report is nonetheless forecasting (page 4) a quicker medium to long-term transition, with 2030 now forecast to see a 65% BEV new car market mix. This is up 5ppts over the previous forecast.

Geopolitical uncertainty has arguably done more to champion electric mobility during the past four weeks than any Elon Musk tweet, fancy product launch or 0- 100km/h number has done over the past 4 years.

Half decade EU CO2 regulations, allowing manufacturers to catch 40 winks before the next CO2 cut comes into play may well have caught some napping. Exceptions have been Toyota, which may not have the BEVs (yet) but invested heavily in their profitable full hybrids and took a far steeper long-term trajectory regarding its CO2 reductions. In addition, other OEMs such as Tesla and Chinese OEMs that aren’t stuck with the unenviable task of transitioning from a century-old business model to a new one within a decade are likely to be more agile in the face of current market adversity. Listening to a sombre VW Herbert Diess during VW’s annual results call last month (despite positive results), he appeared to say they don’t need more demand for BEVs as they already have their hands full with overflowing order books right now.

BEV/ICE parity to be reached sooner than expected?

However, with ICEs potentially looking in part like stranded investments to some degree over the past weeks, during the same call, CFO Arno Antlitz said the group expects BEV/ICE parity to be reached sooner than expected. According to Antlitz, price rises for ICEs, more scaling benefits from BEVs due to the increased Ford deal – licensing VW’s MEB platform – and the scaling game of BEVs could begin early.

The window up until the next EU CO2 cut in 2025 (-15% target over 2020/2021 CO2 targets) was always supposed to be the period to push those profitable ICE assets and use those profits to fund the transition to more EVs from 2025. Porsche‘s IPO may now have to fill that gap. Once fuel prices head south again, following Russia‘s push to offload its oil to markets such as China or India, and Europe is left with the black stuff those markets have vacated, like a revolving fossil fuel carousel, the question remains if that wind of change is still blowing or just a mild breeze?

Auto Trader – the UK’s largest automotive marketplace – continues to witness a resurgence in consumer demand for electric vehicles (EVs) on its marketplace, with the volume of enquiries for both new and used EVs reaching record levels during March. A record one-third of enquires to dealers are now regarding EVs. However, the crux is, many models are sold out for 2022. Looking further afield to Germany, the removal of the so-called innovation bonus top-up in 2023 (maximum boost of €3,000 removed) has caused many BEV sections of dealer forecourts to look like soviet supermarket shelves.

A CEO of one of the world’s largest automotive tier one and two suppliers told this report last month that he urgently wanted to switch the company’s car fleet to entirely pure electric but was simply unable to get hold of the models. Therefore he said they will likely have to take diesel vehicles for the next four-year lease cycle to 2026. With raw material price rises expected for both ICE and BEV (UBS‘s Patrick Hummel told the Financial Times he expects commodity costs have added 5 to 6 per cent to the total price of a fully electric vehicle), the realisation is, the days of cheap motoring are over, and new business models will need to cater to this.

The European Electric Study (20 pages) is published on a monthly basis and covers the entire West European region in a detailed data-driven manner.