aIn recent years, affordable new electric family cars have become difficult to come by in Europe, especially those made in the EU. According to campaign group Transport and Environment, no domestically produced electric models priced below €25,000 (£20,740) will go on sale across the EU in 2022-2023.
But things have changed over the past few months, with new cars arriving one after another, from the Fiat Grande Panda to the Citroën ë-C3, from the Hyundai Instar to the latest Dacia Spring and Renault 5. Suddenly, buyers had more options.
That’s no coincidence. Carmakers will have to sell more electric cars or face fines as stricter EU carbon emissions targets begin on January 1. New battle lines are being drawn, with industry hoping for rules to be eased and environmentalists demanding a firm response from the EU.
Automakers around the world are struggling with weak demand for models powered by batteries and internal combustion engines. The decline in profits comes at a difficult time for the industry, just as it is trying to find funding for an expensive transition to electric vehicles (EVs).
2024 was a record year for electric vehicle sales globally, driven by the incredible growth of the Chinese industry. However, European markets are experiencing a painful slowdown. Berlin-based electric vehicle analyst Matthias Schmidt expects sales to fall by 1.4% in the 18 largest markets in Western and Northern Europe (including the UK and Norway) over the past year.
The main reason for the decline was the end of generous subsidies for new electric vehicles in Germany, the continent’s largest EV market. Will Roberts, head of automotive research at consultancy Low Motion, said the ending of the €5,000 per car incentive was “a very difficult thing to overcome” for consumers in the EU’s biggest car market, adding that German politics That’s what the confusion is about. That meant that there was “no political or social incentive to turn the situation around.” EV sales also slumped in France, likely due to the country’s own political uncertainty.
Schmidt said some automakers are doing better than others. Ford has struggled to sell its Cologne-made electric car models, but BMW and Stellantis have previously said their emissions targets are OK. Dedicated electric car brands Tesla and Polestar, as well as faster-moving Volvo, are already well ahead of their targets, meaning they can sell “credit” to rivals.
But the timing of the overall sales decline has politicians wary, as car companies blame regulations for factory closure plans. Volkswagen has shocked Germany by announcing plans to close up to three factories in the country. This is the first time I’ve considered closing it. Ford is cutting 4,000 jobs in Europe, Stellantis has repeatedly halted assembly operations at its headquarters plant in Mirafiori, Italy, and announced the closure of its van factory in Luton, England.
In the UK, manufacturers have successfully argued that there should be scope for fines. The industry wants the same across channels. Influential lobby group the European Automobile Manufacturers Association (Acea) is calling for a “clear political statement by the European Commission by the end of 2024” committing to easing emissions standards to protect jobs. .
There are signs that European policymakers may follow suit. Commission President Ursula von der Leyen will launch a “strategic dialogue” on the European car industry in January. Italy’s right-wing government of Giorgia Meloni is at the forefront of relaxing emissions regulations. German Chancellor Olaf Scholz, who is running for re-election in February after the collapse of the three-party coalition government, has also expressed his intention to reduce the fine.
Acea’s director general, Sigrid de Vries, called on the EU to recognize that the rules risked “depressing the transition rather than accelerating it” and were harming European industry. . “In terms of the transition we’re in now, no one expected us to be in such a dire situation. We’re in a very different world in many ways,” she said.
Acea expects changes such as allowing manufacturers to make up for unmet targets with increased electricity sales in later years. Another option is a phase-in period that effectively allows manufacturers to miss their targets in the first year.
Luca de Meo, Renault’s chief executive and president of Asea, recently said that if things continue, the industry risks losing up to 16 billion euros in “investment capacity”. The biggest risk he cited was fines. Car manufacturers will pay 95 euros per gram of carbon dioxide if their average emissions exceed the target of 93.6 grams per kilometer.
However, the figure of 16 billion euros is disputed. Lucien Mathieu, T&E’s automotive director, said it was based on 2024 sales ahead of the new model. It’s “like judging an athlete’s performance based on the previous year’s practice sessions,” he says.
De Vries admitted that the €16 billion was not an actual forecast, but an “envelope” figure indicating the scale of change that would need to be “digested in some way”.
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Whatever the actual cost, part of the calculation includes the cost at a deep discount to the industry. While automakers’ profits decline, it also benefits another important group: consumers. Consumers pay less for the cars they rely on.
Five years ago, this newspaper reported that 2020 would be the year electric cars became mainstream, as the first phase of five-yearly EU regulations began. The number of electric vehicle models launched in 2020 doubled that year to 19. Sales soared, according to data firm MarkLines. The same thing happened this time. After 26 EV models will be launched in 2023, 45 EV models will be launched during 2024, and at least 35 more EV models are already scheduled to be launched next year.
Roberts said there is credence to the idea that automakers have throttled the model. “For VW to sell BEVs (battery electric vehicles) in December is basically of no value to them,” he said. “If we can delay EV sales until 2025, we can avoid the fine,” Roberts said.
Mathieu agreed. “Car manufacturers are holding off on launching more affordable models until next year. Why do we need to sell EV models this year if we need them next year?” he asked.
Most analysts therefore expect electric vehicle sales across Europe to rise sharply in 2025, with only a small drop in 2024 before the transition accelerates.
But some analysts and activists worry that lobbying for deregulation could harm Europe’s industry in the long run. Every time European automakers stumble, Chinese EV startups led by BYD take another step forward. The EU’s 21% to 38.1% tariffs on Chinese cars are thought to be unlikely to prevent the company from gaining customers across Europe.
“Weakening the targets will not help the industry in any way because it will put us further behind China,” Mathieu said. That would be “rolling out the red carpet for Chinese manufacturers.”
