The latest G7 Environment summit in Turin reiterated it once again: «The key technology for the decarbonisation of road transport is electric». Yet, on the continent that has set the most ambitious goals for abandoning old combustion engines, the transition to electric is proving slower than expected. With a regulation approved in 2023, the European Union has ordered a stop to the sale of new petrol and diesel cars starting from 2035. An ambitious objective, there is no doubt, but which to be achieved requires a rate of even higher growth than what we have seen so far. Data from Acea, the European manufacturers’ association, reveal that over one and a half million electric cars were sold in 2023, up 37% compared to the previous year. In percentage terms, 14.6% of vehicles sold in EU countries last year were electric.
Sales data in Europe
A closer look at the data reveals that all 27 Member States recorded an increase in electric car sales compared to 2022. Eight EU countries (Belgium, Bulgaria, Cyprus, Denmark, Estonia, Finland, Greece and Portugal) even recorded a growth exceeding 100%. The black jersey goes to Germany, the largest European market, which can still count on double-digit growth compared to the previous year (+11.4%). However, there is one factor that causes concern: the strong growth recorded in 2023 is not being repeated this year. In the first three months of 2024, Acea data also reveal, registrations of new electric cars in Europe grew by only 3.8%. Among EU countries, 15 recorded increasing figures, while the remaining 12 saw sales decline. Among the large markets, France and Spain grew the most, with +10.9% and +7.7% respectively compared to the first quarter of 2023. Germany and Italy, on the other hand, fell to -14.1% and -18 respectively. ,5%.
A crisis in sight?
In short, the data on electric car sales in Europe continues to grow. The problem is that they do so at a pace that is decidedly too slow compared to the objectives set for 2035. This is also confirmed by the difficulties of some car manufacturers. In 2023, Volkswagen has cut 269 jobs at its factory in Zwickau, Germany, due to the “market situation”. In March 2024, Stellantis formalized a month’s stop at the Mirafiori plant, where the electric 500 is also produced. All signals which, added to the less than encouraging data on sales in the first quarter of the year, raise a question: is the electric car already in crisis? According to Giovanni Sgaravatti, analyst at the Bruegel think tank and energy policy expert, the answer is no. «With the number of cars sold continuing to grow, the market is exiting the “infantile” phase and entering the maturity phase. It is normal for the growth rate to slow down”, explains Sgaravatti.
The importance of incentives
There are two reasons that help explain why electric car sales in Europe are struggling to take off. The first has to do with the incentives put in place by governments. Until the price of battery-powered vehicles is as competitive as that of motor vehicles, purchasing incentives will continue to play a key role. In Italy, for example, in March and April the electric car market entered a sort of temporary paralysis. The reason? The continuous postponement of the entry into force of the new Ecobonuses, announced but not yet operational, which has convinced many potential buyers to postpone the purchase of an electric vehicle while waiting for the new discounts. «The numbers are starting to clearly reflect the alarm about the dangerous interregnum between the old and the new and more advantageous incentive system», observed Francesco Naso, general secretary of Motus-E, a few weeks ago. A somewhat similar situation has also occurred in the United Kingdom, where some manufacturers have warned Prime Minister Rishi Sunak that there will be an “electric vehicle crisis” if his government does not reintroduce incentives for car purchases less polluting.
The mistakes of car manufacturers
There is another reason that could explain the below-expected growth of electric cars and it has to do with the difficulty of some car manufacturers in reading market developments. «Many manufacturers have resisted the transition to electric and are now paying the consequences», says Sgaravatti. Ford’s catalog, for example, contains only two electric models: the F-150 Lightning (a pickup) and the Mach-E (a sedan). Furthermore, these are two products designed for a high-end market, with starting prices too high for many consumers. The same goes for Tesla, which in the last four years has introduced only one new model on the market – the Cybertruck – with a starting price of 80 thousand dollars. In short, without cheaper options the electric car will never be a truly affordable solution for everyone. «Betting on the high-end market, instead of focusing on the mid-range market, could prove to be a mistake», observes Sgaravatti.
Looking for smaller (and cheaper) cars
Much of the electric car offer today is designed for a public with good economic resources. This is also confirmed by an analysis by the Transport & Environment association, according to which between 2018 and 2023 car manufacturers introduced 66 luxury or large electric models on the market. And it could be precisely the lack of supply of cheaper models that explains, at least in part, the disaffection of many Europeans towards electric cars. In China, explains Sgaravatti, “over half of small electric vehicles are cheaper than their motor competitors, with some models on sale for 15 thousand dollars”. In Europe, on the contrary, models with a list price under 25 thousand euros can be counted on the fingers of one hand. The offer of smaller and cheaper electric cars has allowed the Asian country to reach a much higher level of market penetration than the United States and the European Union, where manufacturers have preferred to focus on the production of SUVs and luxury cars. «Car manufacturers have higher profit margins on large cars: 10/15% for SUVs, versus 6/7% for smaller models», points out the Bruegel expert. A first sign of repentance from car manufacturers comes from Elon Musk, founder of Tesla, who announced the introduction of a new, more economical model within the next year.
How electric car sales are going in the world
If we look across the world, the automotive transition towards electric seems to be proceeding at a decidedly faster pace than in Europe. This is confirmed by data from the IEA, the International Energy Agency: in the first quarter of 2024, global sales of electric cars grew by 25% compared to the same period of the previous year. This year, again according to the IEA, more than one in five cars sold in the world will be electric. The data relating to the first quarter of 2024 add to the excellent performances of 2023, when a total of 14 million electric cars were sold, up 35% on 2022. To understand the speed at which the market is growing, it is sufficient to expand look at previous years. In 2018, just 2% of cars sold worldwide were electric. Five years later, in 2023, the percentage jumped to 18%.
The growth of China, the slowdown of the American market
Almost all electric car sales are concentrated in three large markets: China, Europe and the United States. But it is above all the Asian country that is driving the sector, with 60% of new registrations, compared to 25% in Europe and 10% in the USA. IEA projections estimate that by the end of the decade, a third of the cars circulating in China and a fifth of those circulating in Europe and the United States will be electric. However, it must be considered that the American market, just like that of the EU countries, has started 2024 with the handbrake on. In the first three months of 2024, growth in the sale of electric vehicles in the US stopped at +2.7%, well below the +47% recorded in the same period last year. «The American market has slowed down, mainly due to the decline in sales of Tesla and its big three (Ford, GM and Stellantis). Added to this was the installation of charging points, which was slower than expected, which contributed to discouraging the purchase of electric vehicles”, explains Sgaravatti.
The risks of a reverse gear towards electric
Finally, there is one last factor to take into consideration when discussing the future of electric cars: politics. In recent years, the automotive sector’s transition to less polluting vehicles has turned into an election campaign issue. Greens and progressive parties are pushing to set aside motor vehicles, while the more right-wing political groups are holding back the transition. Identity and Democracy, the political group of the European Parliament of which the League is part, is asking for example to revoke the regulation approved last year which imposes a stop on the sale of new petrol and diesel cars starting from 2035. «It would be a signal devastating market situation and would probably imply a further slowdown in the internal production of electric vehicles in Europe”, observes Sgaravatti. The same obviously applies to the United States, where the presidential elections will be held in November. «Electric mobility is clearly the future both in Europe and elsewhere, the question – insists the Bruegel expert – is whether we want to save parts of our automotive industry by encouraging electrification or not».
Cover photo: Dreamstime/Tom Wang
Read also:
