Whisper it behind closed doors, but the electric revolution in Europe might have made a false start. The move to electric vehicles has reached a plateau and is helping to turn a problem in the industry into a crisis. The European industry is being undermined by a weak economy as sales overall weaken. The market isn’t being helped by the curb on high-profit margin internal combustion engine (ICE) vehicles by EU laws designed to boost EV sales. A sales onslaught from China isn’t helping Europeans.
Europe’s biggest carmaker Volkswagen, including brands like Skoda, SEAT, Audi, Porsche, Lamborghini, and Bentley, has been forced to consider shutting factories and firing workers for the first time in its 87-year history. Multi-brand Stellantis, including Jeep, Chrysler, Dodge, DS, Peugeot, Citroen, Fiat, Opel, Vauxhall, and Maserati, is suffering similar problems. EU politicians who designed the plan to force its citizens into EVs in the name of saving the planet from global warming might be forced to think again. Targets to drastically slash purchases of ICE vehicles in favor of EVs have met with great reluctance from the sedan and SUV-buying public.
EV prices are too high, capabilities too poor versus ICE and the charging network insufficient. This will come as no surprise to industry leaders like Stellantis CEO Carlos Tavares, who noted this years ago. Tavares said in interviews that electrification is a technology chosen by politicians, not by industry, and there are cheaper and faster ways to reduce carbon emissions. Currently, the sales of EVs in Western Europe are running at about 2 million a year, less than 20% of the total. But EU and U.K. regulations insist this should hit 80% by 2030 and 100% by 2035.
Britain is even considering moving the 100% date forward to 2030. Many industry experts have been cutting their forecasts, ranging between 38% and 60% EV market shares for 2030. More than quadrupling EV sales over 5.5 years looks impossible unless European politicians are willing to bankrupt the industry by destroying ICE output. Pressure is mounting to abandon this unworkable directive and replace it with a mandate to find the best way to curb CO2 emissions, be it hybrid, plug-in hybrid, fuel cell, improved ICE, or EV. Investment bank Morgan Stanley, in a report titled “Global EVs: Plateau or Progression? Time for a Global Pivot”, said it might be time for a rethink, including deals with Chinese companies.
The report suggests that growing economic uncertainties and geopolitical barriers will stall global EV adoption over the next 12-18 months. Global alliances engaging Chinese smart EV tech with local market access will be critical to navigating macro challenges and reigniting EV momentum. While mass EV adoption remains a long-term ambition, the fractured macro environment and rapidly evolving EV tech require a more decisive role for multilateral collaboration.
Morgan Stanley cut its global forecast for EV market share between 2024 and 2026 by three percentage points to 17%, with key weakness in developed markets. However, they expect re-acceleration between 2026 and 2030 to 32%, an eight-percentage point drop from the previous estimate. Western manufacturers will likely spend less on EV technical development, focusing instead on affordability and collaboration. China’s EV makers will be more cost-conscious, Morgan Stanley said. Professor Ferdinand Dudenhoeffer, director of the Center for Automotive Research in Germany, said EVs are irreplaceable for driving CO2-neutrality, especially as China systematically advances in electromobility.
In Britain, the target of at least 80% EV market share by 2030 is causing problems. The target for 2024 is 22% EVs, prompting industry analysts to call for government reviews and financial support. Chester Springs-based Auto Forecast Solutions analyst Sam Fiorani agrees the industry has gotten ahead of itself in the race to electrify. Fiorani suggests spreading the transition over the next decade will mean most new vehicle buyers will not be purchasing EVs this decade. Any mandate requiring this shift was premature and failed to consider consumer preferences.
Gradually tightening emissions regulations, instead of requiring electric vehicles, puts pressure on engineers and executives to create sellable and profitable cleaner products. The market is seeing a rise in hybrids, plug-in hybrids, and extended-range EVs. While infrastructure is being built, EVs and fuel cell vehicles will eventually flourish. Partnerships between global and Chinese manufacturers are essential to avoid an EV-generated recession exacerbated by political tensions, economic challenges, and technology disruption.
The false start is rooted in the industry choosing the wrong vehicles to lead the electric revolution in Europe. The focus should shift to making affordable urban runabouts using electric technology, much like the mobile phone revolutionized due to affordability and irresistibility.
