The EV bust in Europe a red flag for region’s climate goals

PARIS: Europe’s plunging electric-vehicle sales are painful proof the market isn’t ready to stand on its own, putting governments on notice for more support until affordable EVs become a reality.

The glut is clogging up ports and factories are cutting production - a red flag for the region’s climate goals and risk of job cuts after Tesla Inc.’s mass layoffs this week.

Without subsidies, the cost of EV ownership no longer makes sense for many drivers. Insurance and repairs are more expensive than for combustion-engine cars, and many would-be customers still bristle at limited charging infrastructure.

At the same time, rapid technological advances and Tesla’s price war are causing resale values to plummet, putting ownership further out of reach.

"We are losing momentum,” said Mattias Bergman, chief executive officer of auto industry group Mobility Sweden, where sales slumped by nearly a fifth during the first quarter.

"The market is no longer growing, and the share of electric cars in the market is actually decreasing.”

For the industry, it’s too late to turn back the dial.

Volkswagen, Mercedes-Benz, Stellantis and other carmakers have invested billions and are now grappling with building out new lineups even as demand weakens.

Last month, sales in Europe declined 11% from a year ago, tipping the whole market into reverse, as Germany, Sweden and Italy saw EV declines of around 30%.

Changes in incentives have been a trigger for the reversal.

Germany, looking for savings during an unprecedented budget crisis, yanked its popular subsidy program suddenly late last year, causing EV sales to halve in December.

In Sweden, among the most advanced EV markets in Europe with 39% of new vehicles sold last year battery powered, the government ended an incentive and then lowered fuel taxes, making combustion-engine cars even cheaper by comparison.

"People just don’t earn enough to buy these cars,” said Laurent Favre, CEO of French auto-part supplier OPmobility.

"There’s a gap between supply and demand and it’s normal that the subsidies won’t last forever. Reality is catching up with us.”

Governments are starting to do more with less.

Italy is considering grants of as much as €13,750 (RM71,000) on EV purchases for low-income families who trade in decades-old cars.

In France, President Emmanuel Macron’s cut-price EV leasing contracts for poorer households have been wildly popular.

In the UK, the House of Lords in February said it was "premature” for the country to end a plug-in grant for private buyers in 2022.

Since then, EV sales have flatlined as a share of overall new car purchases. New targeted grants should be reconsidered, the report said.

"The grants were lifted too early,” said Andy Palmer, interim CEO of charging company Pod Point and former head of Aston Martin Lagonda Global Holdings Plc, with consumers reluctant to spend comparatively more on an EV, especially when the charging infrastructure is lagging.

"If you want to speed up adoption you’ve got to reduce the cost of the cars, you’ve got to put cars in that US$20,000 to US$30,000 bracket.”

Months into owning a Mercedes EQB, Naeem Badiuzzaman in Milton Keynes, England, says he’s ready to trade in the vehicle, which he acquired with the help of a company incentive program.

A dearth of charging stations has meant regular 45 minute waits, and even medium-distance trips required him to stop and top up his battery. When his two-year lease ends, Badiuzzaman plans to switch to a hybrid.
"I would currently not recommend an EV to my family or friends,” he said.

"For the price of an entry level electric vehicle, you have wide range of slightly more premium petrol cars.”

Sentiments like his are bad news for Europe’s ambitious plan to phase out sales of new combustion-engine cars by 2035.

Carmakers have begun lobbying for a softening or delay to that plan, as well as interim benchmarks they’re supposed to hit along the way.

Still, the shift to EVs has become highly politicised, and ill-conceived measures can backfire.

France’s yellow vest protests in 2018 over increased fuel taxes brought the country to a standstill. In the UK, London’s extension of the city’s ultra-low-emission zone has prompted vandalism.

Germany’s far-right AfD party has denounced the forced shift away from combustion-engine cars, and the issue could feature prominently in upcoming elections in September in the states of Thuringia, Brandenburg and Saxony, where the AfD is leading in polls.

"Consumers in Europe are lost right now as governments change the rules for EV subsidies too often,” Alexandre Marian, partner and managing director at consultancy AlixPartners.

"What is badly needed is some continuity in the rules in the run-up to 2035.”
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