Latest Executive Summary from the February 2023 European Electric Car Study:
One would be forgiven for thinking that the latest February data pointed back to business as usual as inventory returned to the market and BEV volumes subsequently rose by almost a third on the same month last year. With the gaping electric vehicle supply gap in January, bringing monthly year-on-year growth to just 11.9% y/y thanks to the BEV splurge in December as consumers rushed to profit before BEV subsidies were either reduced (Germany), wiped out completely (Sweden), or where taxes for electric models were about to be reintroduced 2023 (Norway), there was little left on the shelves during the opening month of the year. With more models available in February, some of those order backlogs from 2023 could be cleared, seeing annual growth rates rise 22.6% during the opening two months of the year. However, while the next few months should reflect even greater increases on the back of low inventory during the same period last year due to the wire-harness shortage caused by the Ukraine war as well as China's zero-Covid hit, and consequently, shuttering production lines, the strong market narrative may be a mirage. The second half of the year is likely to run out of puff once order books thin out, reflecting narrowing order intakes. The first signs of discounts returning are already evidence perhaps.
Regarding individual market performances, Norway witnessed an 83.1% BEV new passenger car registrations mix in February and almost unchanged volumes (+0.4%) compared to the same month last year, making up for a 81.4% fall just one month earlier in what would hint as business as usual. The Norwegian auto association, OFV, are expecting a BEV mix of 90% this year in the market that sees an ICE new car ban from 2025. However, they expect to adjust the total volume downwards as the year progresses from the current prognosis of 154,000 (2022: 174,300). Fellow Nordic market Sweden saw new BEV volumes return to growth (+13.1% y/y) in February, following January's 18.5%y/y fall. Strong order backlogs are expected to help H1 2023.
The total 18 market region rose almost three times faster (32.4% y/y) than the total new passenger car market (11.7% y/y) in February, seeing the BEV market penetration rise to 14.3% (+2.2 ppts y/y), bringing the 2-month year to date BEV penetration to 12.6% (+1.2% ppts) and the 12-month rolling total to 15.2%.
The following months are expected to show more initial positive signs in terms of year-on-year volume growth across the region in a market that struggled with the consequences of the shortage of Ukrainian-made wire harnesses during the second quarter of last year and was reflected in Q2 2022 BEV market penetration falling to the lowest level in four straight quarters (12.3%). Tesla's Chinese-made models accompanied all of that, missing Q2 2022 delivery targets struggling from China's COVID-shutdowns last year.
So dig a little deeper and the numbers may have a sting in their tale. Despite rosy data, Sweden's Automotive Association, Mobility Sweden, are already readjusting forecasts downwards. With the Swedish government stripping away the final amounts of purchase incentives for electric cars during the closing period of last year, as well as reduced private purchasing power under the current global economic situation where private leasing deals once appeared highly attractive, their forecast for the total market has been reduced to 265,000 from 290,000 previously for 2023, putting it down to them witnessing a clear slowdown in the pace of orders. CEO, Mattias Bergman, puts the cooling on demand from the private market at blame, with low-interest rates setting the market alight from 2021, following the Covid hit in 2020, and the change in purchasing patterns towards private leasing which led to a double win for electric cars that also offered the government-funded climate bonus. The plug-in mix forecast remains the same, however at 65%, with 40% being BEV and 25% being PHEV. During the opening two months, it stood at 53.2%, making it the only EU market with a combined plug-in penetration above half, with lots of volumes, presumably orders from 2022, being delivered this year. Non-EU markets Norway (87.4%) and Iceland (57.6%) also achieved this feat. All five Nordic markets (Finland: 46.4% and Denmark: 33.3%) continued to top plug-in mixes across the 18 market region, with the next best being The Netherlands (33.0%), while the regional average just over one-fifth (20.3%).
This isn't just a Swedish issue, though, with the same macroeconomic headwinds hitting the entire region. A reduction in purchase subsidies in key markets in Germany, a total reduction in the UK and a tax increase (reintroduction of VAT and a weight based-tax) in Norway are all potentially seeing an impending torpedo hit for the private electric car market in the second half of the year once the lag in order/deliveries flattens out. Although the fleet market is likely to offer some relief with attractive tax rates remaining in markets such as the UK, Germany and Belgium. A discount battle could emerge for battery electric models during the second half of the year to regain confidence from a struggling private market with CO2 fleet targets looming.
While all is looking good so far, caution should remain, and like a decent football match, 2023 is set to be a story of two halves!
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?
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*Western Europe 18 Markets: EU Member States prior to the 2004 enlargement plus EFTA markets Norway, Switzerland, Iceland, plus UK