Porsche is resuming developing ICE technology for the Panamera, and Cayenne SUV
The day of reckoning is imminent for the European Union’s drive to force its citizens into buying electric vehicles against their will.
Unless the EU tones down its attempt to create a market based on a politicians’ wish list rather than consumer demand, it will cause existential damage to the flagship European automotive industry, and risks a political backlash, analysts say.
EV supporters aren’t happy and won’t countenance any tinkering with the plan. Expect much argument in the European and British Parliaments.
The EU demands EVs account for about 80% of new car sales in 2030, and 100% by 2035. Britain is expected to bring the 100% date forward to 2030. But sales of EVs across Europe have stalled because they are too expensive and don’t offer the all-round utility of an internal combustion engine vehicle. Charging networks are too thin on the ground, have clunky payment systems and a reputation for unreliability.
“The targets are too optimistic and are not aligned to today’s reality. They might have been the correct objectives 5 years ago when the Chinese did not play their part, and there was a solid demand for all kinds of cars. The situation has changed dramatically and so should the targets. Otherwise, there are big economic and social risks,” said JATO Dynamics Global Analyst Felipe Munoz in an email.
It is becoming clear that the path to a market dominated by EVs is hopelessly ambitious and needs to be amended. If not, Europe’s auto industry will be mortally wounded.
The EU and Britain decided in the name of saving the planet from global warming to force what it considered to be the only option for slashing carbon dioxide emissions from transport – battery-electric sedans and SUVs. That meant laying down a strict timetable for cutting CO2 emissions.
Incapable of providing affordable EVs
The trouble is Europe’s automakers have shown themselves incapable of providing enough affordable EVs. China is way ahead of Europe and could easily fill the gap, but that would cripple, if not destroy, the European industry. Automakers have been reluctant to protest in public against the EU regime, worrying that would undermine their image with the public.
The new electric Porsche E-Macan. (Photo by Jan Woitas/picture alliance via Getty Images)
German automakers were the first to break ranks and demand a dilution of the CO2 rules. In Britain, Nissan recently protested local CO2 rules as it announced output cuts and job losses. Stellantis’s U.K. subsidiary Vauxhall shut a plant employing 1,100 workers. Ford UK has asked the government to relax the rules. The British government has said it will look at the rules after the industry warned it will cost billions of pounds in extra costs and fines.
Evidence is mounting that the rate of expansion in EV sales will not come close to the 2030 target.
“EV share in Europe has reached 22% in the first 10 months of 2024 quite a way behind forecasts from 2022 expecting 35% EV penetration in 2025,” Bernstein Research said in report.
EV sales in 2024 will reach about 2 million in Europe but will need to more than quadruple to reach the 2030 target. Recent forecast downgrades show the target is getting further away.
In late November, investment researcher Jefferies slashed more than two million sales from its 2030 forecast. The 2030 forecast now stands at 4.7 million for a market share of 35%, down from the previous 50%. In June, Jefferies cut its Europe forecast to 6.8 million in 2030 from the 8.9 million published late last year.
In April, investment bank UBS said Europeans will buy almost nine million fewer electric vehicles between 2024 and 2030 than expected. UBS cut its forecast for European EV sales to 8.3 million in 2030 compared with its previous estimate of 9.6 million.
Schmidt Automotive Research reckons in 2024 West European EV sales will hit 1.9 million for a market share of 16.6%. In 2025 there will be a big jump to 2.7 million (22.2%) as EU CO2 rules tighten. Sales will advance by about 5 million between then and 2030 to 57% of the market, according to Schmidt.
Expect Brussels to extend past 2035
Professor Ferdinand Dudenhoeffer, director of the Center for Automotive Research in Bochum, Germany, expects EU politicians to concede that damage limitation requires concessions to the automakers, including a delay to the 2035 outright ban on ICE vehicles.
“I think the ban of ICE in 2035 will be discussed in Brussels (EU headquarters) and they will decide not to ban. If that is the case, they will also abandon the 80% EV rule for 2030,” Dudenhoeffer said in an email exchange.
Stellantis plans to close the Vauxhall van factory in a rebuke of the government mandating more … [+]
European politicians are gradually coming around to the need for changes.
German Chancellor Olaf Scholz said the EU should retain the rules but suspend fines for CO2 rule transgressors, allowing the manufacturers to use the funds to improve their EV technology.
German luxury sports-car maker Porsche reflected manufacturers’ EV wariness by saying it would develop new ICE technology to meet demand for combustion-powered Cayenne and Panamera models as EV sales weakened. Volvo has slowed its path to 100% EVs.
The German transition to EVs cost 46,000 jobs between 2019 and 2023 and will cost another 140,000 by 2035, according to a study by German auto industry association VDA. Volkswagen, Europe’s biggest carmaker is threatening to shut at least three factories in Germany.
This isn’t going down well with EV supporters. Peter Ramsay, in a column for the EVinFocus newsletter, said climate think tanks, trade unions and some unnamed manufacturers who are confident of reaching the CO2 targets are pushing back from this attempt to water down the rules.
Ramsay reports EU member states like Czechia and Italy were seeking to postpone the timetable or limit the penalties for failure. Czechia called for technological neutrality, which would mean market mechanisms deciding the winners between EVs, hybrids, plug-in hybrids e-fuelled ICE, and fuel cells.
“In other words, taxpayer money for the nonsense of FCEVs (fuel-cell electric vehicles) as a vehicle passenger solution and/or e-fuels to try to keep ICE expertise on life support for a little bit longer,” Ramsay said.
Hopeless EU targets
EV sales are expected to return to a higher gear but the pace required to reach EU targets looks hopeless, according to JATO Dynamics’ Munoz. He points out the European market overall has lost around 3 million sales since before the Covid pandemic.
“This negative reality is not a good start for the expected shift from ICE to EV that the authorities want, especially if the EVs continue to be so expensive.”
“EV registrations through October 2024 posted a 2% drop vs Jan-Oct/23. In the best of cases, a 5% increase annually between 2025 and 2030 would take EV volumes to something around 3 million units. Last year, the whole new car market registered 12.8 million units. In the best of the cases a 15% annual increase in EV demand would take the EVs total to 5.1 million, still far from last year’s 12.8 million units, and quite unrealistic. You can’t have an annual increase of 15%,” Munoz said.
Munoz said much cheaper batteries will soon cut the price of EVs, but Western countries still don’t control the supply for battery component because China does.
“This dependence on China is dangerous and can have an impact on the goals set by the EU and the U.K. As long as Europe and the U.S. don’t have control over the raw materials to produce their own batteries, their EV industries won’t be competitive.”
“The (recently introduced) tariffs on Chinese EVs are just a short-term solution that doesn’t solve the real problem: the lack of competitiveness of European and American industries,” Munoz said.
