EV Sales Forecasts Cut, While Germans Seek CO2 Relief

EV Sales Forecasts Cut, While Germans Seek CO2 Relief.

“Cheaper EVs at the Paris auto show are a much-needed addition”

Forecasters are busily slashing their long-range forecasts for electric vehicle sales in Europe, raising questions about the achievability of government targets.

At the Paris Car Show this week, BMW raised the temperature as the German industry sought relief from the EU’s CO2 emission rules, saying they posed an existential threat.  

European EV sales are currently plateauing at around 2 million a year and need to jump around five times that to reach European Union and British government quotas by 2030. Demand has slowed as the early adopter market filled and the corporate market slowed.

The EU and U.K. have decreed that EV sales shall reach about 80% of all new sedan and SUV sales by 2030, and 100% by 2035. These targets are not just tokens. There are big penalties for manufacturers that fail to reach them. In the U.K., there is a penalty of £15,000 ($19,000) for every ICE vehicle sold above the target.

 Nobody doubts EV sales will resume strong growth, but for the targets to be achieved, prices need to be closer to €10,000 ($10,800) than €20,000. The average price for an EV in Europe is currently just over €40,000 ($43,300 after tax), according to Brussels-based green lobby group Transport and Environment. EVs with much smaller batteries designed for urban, rural, city roles are required. These vehicles hardly exist in Europe, although they do in China in the form of the BYD Seagull, Wuling Bingo and a small Leapmotor.

Harsh dilemma
This presents the EU with a harsh dilemma. It could allow imports of these little Chinese vehicles to generate the kind of growth to fulfil its CO2 and climate change targets, and bankrupt its domestic industry, or dump its CO2 targets and save millions of jobs. The EU has imposed tariffs likely to slow Chinese sales.

At the Paris Car Show this week, BMW CEO Oliver Zipse said the EU must cancel its plan to ban the sale of new internal combustion engine vehicles by 2035. It should open the market to alternative fuels like e-fuels or biofuels and hydrogen fuel cells. His insistence on a “strictly  technology-agonistic path” also suggests the EU should reprieve hybrid and plug-in hybrid bans. Other German automakers have joined in this plea.  

Expect T&E to react vociferously.

The weakness in EV sales has been building all year. In April investment bank UBS said Europeans will buy almost nine million fewer electric vehicles between 2024 and 2030 than expected, as high prices, insufficient range, and clunky recharging put off prospective buyers. UBS cut its forecast for European EV sales to 8.3 million in 2030 compared with its previous estimate of 9.6 million.

In June, investment researcher Jefferies cut its forecast of EV sales to 6.8 million in 2030 from the 8.9 million published late last year. This week it left that forecast intact but trimmed 400,000 EVs off its 3.2 million estimate for 2025 for a market share of 21%, not 24%. French automotive consultancy Inovev also has said EV sales would account for only 40% of the European market by 2030.

Strong incentive
Researcher Rho Motion has cut its EV forecast for 2030 by 24.5% to 8.3 million. Will Roberts, automotive lead at Rho Motion, said the EU emission standards provide a strong incentive to drive growth past 2025. There was some evidence cheaper EVs were on the way at the Paris show.

“Cheaper EVs at the Paris auto show are a much-needed addition to the market and with each new model in an attractive and more affordable price bracket, options are opening up for more customers to adopt EVs,” Roberts said in an email reply.

Manufacturers claimed that more affordable EVs were in abundance at the Paris show. The Renault 4 was launched, aimed at the lower end of the market but likely to cost more than €30,000 ($32,500). Most EV launch prices turned out to be more than €30,000, hardly affordable for Europeans on average wages. Renault said it will be offering a new little Twingo in 2026 for less than €20,000 ($21,650). The Leapmotor C10 EV starts at €16,400 ($17,750), while the restyled Dacia Spring is likely to be priced at close to €15,000. Dacia is Renault’s value subsidiary.

Henning Dransfield, strategy director at business software company Infor, agrees price is a problem and will be difficult for Europeans to handle in competition with the Chinese. 

“However, the real challenge lies in achieving profitability. Chinese EV manufacturers, along with their suppliers benefit from massive state subsidies, low-interest loans, and inexpensive land,” Dransfield said. 

“In contrast, European automakers face higher operation and wage expenses without the same support. They could find themselves in a destructive unwinnable price war with the Chinese,” he said.  

New entrants drive down prices
Gartner https://www.gartner.com/en , a technological research and consulting firm based in Stamford, Conn., said EV prices will fall in the mass market, driven down by new entrants and Chinese manufacturers.

“We believe that by 2027, the average price of an EV will reach parity with comparable-sized and specified internal combustion engine vehicles. So as EVs and plug-in hybrids become increasingly popular in the mass market, the average price will come down,” said Jonathan Davenport, Gartner Senior Director Analyst said in a email exchange.

“Competition from new market entrants – both EV and PHEV start-ups and Chinese automakers – will help drive prices down,” Davenport said.  

There’s no doubting the progress in the EV market. Prices are falling and choice is expanding. But to raise sales enough to get even close to the CO2-based emissions quotas looks impossible unless there is a radical shakeup in the vehicle lineup. There’s no sign of that happening.