Why is the electric vehicle market failing to take off in Europe? Keys to the decline

This article was originally published in English

Sales of electric vehicles In July 2024, they rose to 853,000 worldwide, which represents a year-on-year increase of only 6%a lukewarm result that shows that demand for battery-powered models is weaker than expected and raises questions about the sector’s ability to maintain its growth momentum.

What is even more worrying is the poor performance of European carmakers, with several key brands such as Stellantis, Volkswagen and Mercedes-Benz experiencing significant market share losses, according to Bank of America’s latest EV Tracker report.

In contrast, sales of plug-in hybrid electric vehicles rose 58% year-on-year, driven mainly by the Strong demand from China. This shift toward plug-in hybrids may reflect consumer concerns about the Range limitations of fully electric vehicles and the higher total cost of ownership associated with battery electric models, especially in Europe.

European manufacturers struggle to keep pace

European carmakers are struggling to keep up with the competition, especially in the segment of battery electric vehiclesas shown by data from Bank of America.

The market share of Stellantis fell to 2.7% in July, a sharp decline from 3.6% in the second quarter of 2023 and 4.0% a year earlier. The market share of the Volkswagen Group fell to 6.6%, compared to 7.5% in the second quarter of 2023, while Mercedes-Benztraditionally the leader in the luxury segment, saw its market share fall to just 1.9%, compared with 2.5% the previous year.

“Sales of electric vehicles in Germany are currently suffering from a very high comparison base from a year ago, when purchase subsidies for company cars expired,” Bank of America analysts noted.

The global electric vehicle market continues to grow, but weak results from European car manufacturers and the rise of plug-in hybrid electric vehicles indicate that the transition to fully electric vehicles could take longer than expected.

BMW defies the trend

Despite the challenges facing European car manufacturers, BMW has managed to defy the trend, recording a significant growth in its market share of battery electric vehicles.

BMW electric vehicle sales soared 40% year-on-year in July 2024, boosting its market share to 4.6%, up from 3.7% in the second quarter of 2023.

“The i4 and iX1 continue to sell very well and the recently launched i5 is contributing significantly to the annual growth rate“the analysts wrote.

Unlike many of its competitors, the decision to BMW prioritising battery electric vehicles over plug-in hybrids appears to be paying off.

BYD overtakes Tesla, but moves to plug-in hybrid

Chinese car manufacturer BYD increased its market share by 14.7% in the second quarter of 2023 to 17.2% in July 2024, consolidating its position as the world leader in electric vehicles and dethroning Tesla.

However, while BYD’s battery electric vehicle sales in China fell 7%, its global plug-in hybrid sales rose an impressive 62% year-on-year.

Tesla’s global battery electric vehicle market share fell to 14.0%, compared to 19.4% in the second quarter 2023. The decline was especially pronounced in Europe, where Tesla’s electric vehicle sales fell 5% in July.

This decline is partly attributed to rising Model 3 prices, driven by import tariffs on vehicles manufactured in China.

Higher costs slow adoption of battery electric vehicles in Europe

One of the main reasons for the Slow growth of electric vehicles battery-powered vehicles in Europe have the highest total cost of ownership compared to internal combustion engine vehicles, according to Bank of America.

Although battery electric vehicles typically offer lower running costs, high purchase prices and the significant depreciation have slowed its adoption.

In Germanywhich is a key indicator of the European market, prices for battery electric vehicles are still 20% higher than their internal combustion engine counterparts, even after taking into account the Grants and discounts.

Analysts have noted that European consumers They are hesitant to switch to battery electric vehicles due to high initial costs and concerns about residual values.

“Prices for battery electric vehicles must fall to trigger a sales boom, regardless of regulations,” Bank of America analysts say.

What are the prospects for electric vehicle manufacturers?

Looking ahead, Bank of America has revised down its forecast for battery electric vehicle sales in Europe, predicting a year-on-year decline of 2% in 2024.

The European Union’s ambitious emissions targets, including the total ban on the sale of new vehicles with internal combustion engines by 2035, will profoundly influence the future of the automobile market.

While regulatory pressures, especially around carbon dioxide emissions, will continue to push automakers toward electrification, the higher total cost of ownership associated with battery electric vehicles remains a major obstacle for widespread adoption in Europe.