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With the subsidy tap slowly turning what are the consequences for Europe's electric car market?


Key points:

  • West European market remains on target to reach 1.5 million new annual BEV registrations this year (2021: 1.19 mn) with an increase in the BEV production rate from a number of volume OEMs during May and consequently an increase in deliveries during the second half of the year.

  • Germans are driving less each year While home office acceptance since Covid in 2020 and 2021 has undoubtedly played a role during the past two years, as well as rising fuel costs which began to rise even before the Ukrainian war, the trend was for fewer kilometres driven on average per year.

  • PHEVs remain below 10% mix – BEVs hiccup in April appears to have passed Following a hiccup during April, which was likely a delayed response from the Ukrainian wire harness headwinds, BEV volumes witnessed May's year-on-year growth rate increase by six percentage points over the previous month, to 18.1 per cent y/y. Volkswagen Group confirmed that they have 300,000 BEVs on their West European order books which saw BEV order intake grow faster than deliveries.

  • Chinese OEMs, including Polestar, SAIC, FAW, XPeng, Aiways, Nio and BYD saw volumes account for above 5% of the BEV market between January and May (5.1%), translating to a volume of 25,600 units, doubling over the same period last year (12,800) or more than double the pace of the market rate (+40% y/y/).

Quote of the month...

"We expect increasing sales volumes in the second half of 2022. Our products are attractive and in demand, and the supply of semiconductors will gradually improve. This gives us the opportunity to further strengthen our position and increase our robustness. But we also have to seize this opportunity." Volkswagen Group CFO Arno Antlitz, gives some hope that semiconductor issue may be easing. June, 2022, London, UK.


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Like learning to ride a bike, the European electric car industry has been supported by various stabilisers over the years. These have provided confidence through generous consumer purchase subsidies on the one side and tax incentives on the other, while an additional regulatory stick in the form of CO2 fleet average targets keeps OEMs on their toes. Those stabilisers are then removed once enough confidence has been instilled and the market can ride unaided. That moment appears to be arriving in some Northern European markets with various governments keen to reach for the toolbox and remove the aids, confident that enough momentum has been achieved.

The UK, which is very likely to turn to a California-style ZEV mandate from 2024, cut its last remaining car purchase subsidies for BEVs in June, limited to just 1,500GBP (€,1700) during the last few months. Europe's poster child market, Norway, is also planning to reintroduce VAT (25%) for BEVs for the amount of the vehicle priced over 500,000NOK (€48,000) before tax. In addition, the Nordic market will ban the sale of new models which emit CO2 by 2025. It currently lies with an industry-topping BEV mix of 79 %.

Treasury departments, looking to patch up leaky financial holes, having financed Covid recovery funds, green deals and increased military spending, EVs are likely an attractive target for finance ministers. Germany, Western Europe's largest BEV passenger car market in terms of new registrations, accounting for more than every fourth pure electric model registered in Western Europe, could well be next on that list. So far it has aided 1.27 million low-emission vehicles onto the road up to June 2022 according to BAFA data.

Meanwhile, the EU is well on its way to seeing a ban of traditional ICE vehicles from 2035 onwards. The European Commission, European Parliament and all 27 European members (Environment Council) agreed to pull in a similar direction. It will be left to trialogue discussions between all three over the next months, before this is put this into legislation. A slight possibility remains for 'other' technologies however, with a window up to 2026 being left ajar by the Commission when a mid-term review of different technologies would take place. By 2035 North European EU members should all be established markets and capable of riding unaided, while Southern/Eastern neighbours may still need assistance. Romania's Rabla plus scheme highlights the progress that can be made (see report here) BEV penetration levels of 7.6% YTD have been achieved up to May this year, well above its Southern European neighbours such as Spain (3.5%), Italy (3.4%) and Greece (2.5%). The €10,200 Romanian scrappage scheme has been the catalyst here.

France has suggested that they're not quite ready to take the subsidy stabilisers off just yet, deciding just last week that a €6,000 subsidy that was about to expire and reduced to pre-Covid €5,000 levels on July 1, will been extended for the second time. Up until 2023 this time.

A first possible consequence of this tightening grip on European OEMs may have been Stellantis' exit (STEXIT) from the European Automotive lobby group ACEA last month. Seemingly unhappy with the service the Brussels-based group were providing, the Italo-Franco-American company jumped ship weeks after the European Parliament agreed to the European Commission's stricter Fitfor55 emission regulation proposals. With volume OEMs likely to be worst hit by a drop in subsidies and unable to command a higher price point to justify the costs of electrification, French/Italian OEMs may be particularly exposed despite their lower mass fleet weight – Stellantis 160kg below the European average (1,488kg) in 2021 according to EEA data. With momentum perhaps not up to speed in France yet, don't write it off that the Elysee Palace could kick the subsides can down the road once again, especially with rising prices on the horizon. Alongside that Parisians have been snapping up BEVs before an inner city ban for older combustion engine vehicles (Crit'Air) is due before the summer Olympics. European Finance Ministers will no doubt be monitoring the UK to see if it keels to one side or rides on serenely..


May also interest you: European Electric Car Market Full Year 2021: Executive Summary – Full Year 2021 European Electric Car Study click here for the story


*Western Europe 18 Markets: EU Member States prior to the 2004 enlargement plus EFTA markets Norway, Switzerland, Iceland, plus UK


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