Compared to 2021, new passenger car sales in Germany, France, Spain, Italy and the UK fell by at least 11% and up to 20%. The demand for fully electric vehicles (BEV) is increasing; Demand for internal combustion engine vehicles (ICEV), conventional hybrid electric vehicles (HEV) and plug-in hybrid electric vehicles (PHEV) is declining across Europe. Simply put, the demand for BEV is increasing, while the demand for fossil fuel vehicles is decreasing.
“Sales of internal combustion engine (ICE) and hybrid vehicles contributed to most of the shortfall, unlike battery-powered electric vehicles (BEVs) that continued to establish themselves in the market,” Rethink energy writes, leading to the question, has Europe reached peak PHEV and HEV?
Germany had the smallest drop (11%), with more than 1.4 million new vehicles registered in 2022. Spain has had a similar drop compared to 2021, but it has had the hardest time recovering from the COVID hit as you are looking back on 2019. Fewer than 500,000 vehicles sold in the first 7 months of this year, which is more than 300,000 less than the 800,000 vehicles sold in the same period in 2019.
The Italian market fell by more than 20% since last year.
Can European car manufacturers sell their ICEV stock? Will we see massive price wars as competition heats up to move ICE cars? “The increasingly limited shelf life, declining attractiveness and declining overall sales volumes within the market have the potential to create a situation where companies struggle to unload current inventories.” And this applies not only to car inventories, but also to powertrains, exhaust systems and other components that make up the ecosystem of the ICE industry.
The ever-increasing demand for BEVs has prompted European governments to evaluate their use of subsidies. Germany is considering phasing out subsidies, as is France. The UK has already stopped subsidies for passenger cars and is looking at other electric vehicles to encourage.
“As is current policy, subsidies for vehicles under €40,000 in Germany will fall from €6,000 to €4,500 at the beginning of 2023, before falling again to €3,000 in 2024. Cars priced between €40,000 and €65,000 will reduce their subsidy from €5,000 to €3,000, with subsidies for cars priced above €45,000 ending in early 2024. The subsidies for company cars and plug-in hybrid vehicles will also be discontinued at the end of this year.”
Will this lead to a sharp decline in demand for BEV in Germany in early 2023?
European policy is further complicated by the Russian war in Ukraine. Encouraging the use of BEVs will reduce demand for Russian fossil fuels entering the winter, increasing pressure on automakers and their supply chains. Will there be warehouses full of unwanted mufflers?
“When we look at the volatility of the oil market and fuel prices in recent months alongside the continuously increasing demand for BEVs, it is becoming increasingly clear that the demand for ICE and hybrid vehicles has been irreversibly damaged in Western Europe.” Demand for BEV is increasing, demand for ICEV is decreasing.
As BEVs become more price competitive and charging infrastructure grows rapidly, oil prices rise and supply is reduced. This is a script for the ever faster end of the ICE era in Europe.
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