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3 days ago
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Affordable new electric family cars – particularly those that are EU-made – have been tough to come by in Europe for the past few years. There were no launches of homegrown electric models for less than €25,000 (£20,740) across the EU during 2022 and 2023, according to the campaign group Transport & Environment.
Yet in the past few months that has changed, with a rush of new cars ranging from the Fiat Grande Panda to the Citroën ë-C3, the Hyundai Inster to the latest Dacia Spring and the Renault 5. Suddenly, buyers have options.
That is no coincidence. Stricter EU carbon emissions targets kick in on 1 January, meaning carmakers will have to sell more electric cars or face fines. New battle lines are being drawn: the industry wants the rules relaxed, while environmental campaigners are urging the EU to hold firm.
Carmakers around the world are struggling with faltering demand for their models, whether powered by batteries or internal combustion engines. Falling profits have come at a difficult time for the industry, just as it tries to find the money for the expensive transition to electric vehicles (EVs).
Globally, 2024 has been a record year for electric car sales, driven by the extraordinary growth of China’s industry. But the market in Europe has gone through a painful slowdown. Matthias Schmidt, a Berlin-based electric car analyst, forecasts a 1.4% fall in sales across the 18 largest western and northern European markets in the past year (including those in the UK and Norway).
A key factor in the decline has been the withdrawal of generous subsidies for new electric cars in Germany, the continent’s biggest market for EVs. Will Roberts, the head of automotive research at the consultancy Rho Motion, said the end of incentives of €5,000 for each car was “quite a difficult thing to get over” for consumers in the EU’s largest car market, and that turmoil in German politics meant there had “not been any political motivation or societal motivation to turn that around”. France also had a slowdown in EV sales, possibly not helped by the country’s own political uncertainty.
Schmidt said some carmakers were performing better than others. Ford is struggling to sell electric models made in Cologne, but BMW and Stellantis have previously said the emissions targets are not a problem. The electric-only brands Tesla and Polestar, plus fast-transitioning Volvo, are already far ahead of the targets – meaning they can sell “credits” to rivals.
But the timing of the overall decline in sales has alarmed politicians, as car companies have blamed regulation for their plans to close factories. Volkswagen has sent shock waves through Germany with a plan to close as many as three factories in its home country – the first time it has considered a closure. Ford is cutting 4,000 jobs in Europe, while Stellantis has repeatedly halted assembly operations at its main plant in Mirafiori, Italy, as well as announcing the closure of a van plant in Luton, in the UK.
In Britain, manufacturers have successfully argued they need leeway from fines. The industry wants the same across the Channel. The European Automobile Manufacturers Association (Acea), an influential lobby group, has called for a “clear political statement by the European Commission by the end of 2024” that pledges to relax the emissions rules in order to save jobs.
There are signs that Europe’s policymakers may be amenable. The commission’s president, Ursula von der Leyen, is scheduled to start a “strategic dialogue” on the European car industry in January. The rightwing government, of Giorgia Meloni in Italy is leading the charge to relax the emissions rules. Germany’s chancellor, Olaf Scholz, has also signalled willingness to ease the fines, although he is running for re-election in February after the collapse of his three-way coalition.
Acea’s director general, Sigrid de Vries, called for the EU to recognise that the rules risk “stalling the transition, rather than nursing it” and are doing damage to European industry. “Nobody expected us to be in such dire straits when it comes to the transition now,. We’re in a very different world in many ways,” she said.
Acea is hoping for changes such as allowing manufacturers to make up for missed targets with higher electric sales in later years. Another option is a phase-in period that would in effect allow manufacturers to fall short of their targets in the first year.
Luca De Meo, the chief executive of Renault and Acea’s president, recently said the industry risked losing up to €16bn in “investment capacity” if things were left unchanged. The top risk he cited was fines. Carmakers will pay €95 for every gram by which average carbon dioxide emissions rise above a target 93.6g for each kilometre.
However, the €16bn figure is disputed. Lucien Mathieu, T&E’s cars director, said it was based on 2024 sales, ahead of new models. It was “like judging an athlete’s performance based on their practice session the year before”, he said.
De Vries acknowledged that €16bn was an “envelope” figure that illustrated the size of the change that needed to “somehow be digested”, rather than an actual forecast.
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New cars, just in time
Whatever the actual cost, one part of the calculation is the cost of steep discounts to the industry. While carmaker profits fall, it also benefits another important group, consumers, who pay less for the cars they rely on.
Five years ago this newspaper reported that 2020 was set to be the year the electric car would go mainstream, as the first stage of the five-yearly EU rules kicked in. The number of electric models launched in 2020 duly doubled that year to 19, according to the data company Marklines, and sales surged. Something similar has happened this time: after 26 EV models were launched in 2023, there were 45 over the course of 2024 and at least another 35 are already scheduled to go on sale next year.
Roberts said it was credible to think that carmakers had held back models. “Selling a BEV [battery electric vehicle] for VW in December is basically worthless for them,” he said. “If you can delay selling that EV to 2025” then it helps to avoid fines, Roberts said.
Mathieu agreed. “Carmakers are holding back from launching more affordable models until next year. Why sell EV models this year when you need them next year?” he asked.
For that reason, most analysts expect that sales of electric cars will rise sharply in 2025 across Europe – leaving 2024 as a minor blip before the transition accelerates.
But some analysts and campaigners are concerned that the lobbying for relaxed rules could harm Europe’s industry in the long term. Every time Europe’s carmakers stumble, China’s ranks of EV startups, led by BYD, take another step forward. EU tariffs on Chinese cars ranging from 21% to 38.1% are not thought likely to stop the companies from winning customers across Europe.
“Weakening the targets will definitely not help the industry as they will fall further behind the Chinese,” said Mathieu. It would be “rolling out the red carpet for the Chinese manufacturers”.
