Why Europe's electric cars are in trouble
2024-08-17
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An electric car charges at a charging station near the European Commission in Brussels, Belgium, on June 6.
Recently, there are two sets of news about electric vehicles that are very contrasting. One is the domestic aspect: data released by the China Automobile Dealers Association shows that the retail sales of conventional fuel passenger cars in July 2024 was 840,000 units, a year-on-year decrease of 26%; while the retail sales of new energy passenger cars in the same month was 878,000 units, a year-on-year increase of 36.9%. In other words, in July 2024, the domestic monthly sales of new energy passenger cars exceeded those of fuel passenger cars for the first time, which is of turning point significance.
Second, in Europe: According to data released by Statista, a German business data platform, Germany registered 111,000 electric vehicles from January to April this year. At this rate, the annual registration volume is estimated to be more than 300,000, which is significantly lower than last year's 520,000. In other words, in Germany, Europe's largest automobile kingdom, the momentum of automobile electrification transformation has encountered "headwinds" and electric vehicle sales have slowed down significantly.
On the one hand, new energy vehicles, represented by electric cars, are advancing by leaps and bounds in China; on the other hand, Europe, which considers itself a pioneer in climate change, is hesitant in the development of new energy vehicles and is even showing signs of regression, which is a cause for deep regret.
Many years ago, the Netherlands proposed to ban the sale of fuel vehicles in 2025 and focus on developing electric vehicles. In the blink of an eye, 2025 is coming, and this "first move" initiative will become a mirage. In 2022, the European Union also passed a new grand blueprint: starting in 2035, the sale of new fuel vehicles that cause carbon emissions will be banned.
Ideals are full, but reality is very skinny. Over the years, Europe has spared no effort in advocating for responses to global climate change and has proposed a series of measures to promote emission reduction. As the birthplace of the automobile, Europe has clearly proposed a ban on the sale of fuel vehicles, which is worthy of respect. However, the difficulties in the production and sales of electric vehicles in Europe, especially the different voices within the automotive industry, make people worry that the goal of banning the sale of new fuel vehicles that cause carbon emissions in 2035 will also become a mirage?
First, European consumers' attitudes toward electric vehicles have changed, which is an important factor in the significant cooling of electric vehicle sales. In Europe, the high price of electric vehicles has made new potential users hesitate. Take Germany, Europe's largest automobile country, for example. The average price of electric vehicles is close to 70,000 euros, and the German federal government cancelled the electric vehicle purchase subsidy in December last year, which was previously up to 4,500 euros. Another important factor is the high electricity prices in European countries. A survey recently released by the German Federal Statistical Office showed that a German household with an annual electricity consumption of less than 2,500 kWh pays an electricity price of 45.36 euro cents per kWh, which is nearly 3.6 yuan per kWh in RMB (the average household electricity price in my country is more than 0.5 yuan per kWh). Although oil prices in Europe are also expensive, the difference between electricity prices and oil prices is not much, so the cost of using electric vehicles is not significantly economical compared with fuel vehicles.
The high cost of purchasing a car and the lack of economic efficiency in using it have led to a lack of momentum in promoting electric vehicles in Europe. According to a recent market survey by the European Automobile Manufacturers Association, less than 30% of European consumers plan to buy electric vehicles, and more than half of them have clearly stated that they will not buy electric vehicles priced over 35,000 euros.
Secondly, European automakers lack the motivation to develop electric vehicles. European automakers have been operating fuel vehicles for more than a century, and their technology and business inertia mean that it is difficult to change the track again. Take Germany for example, the entire automotive industry and related industries account for a quarter of Germany's GDP, which can be described as "a big ship is difficult to turn around."
As European consumers' enthusiasm for electric vehicles gradually cools, automakers are not as determined as they were in previous years to transform to electric vehicles. Mercedes-Benz Group recently announced at its annual earnings conference that it would no longer adhere to its full electrification plan by 2030, as the popularity of new energy vehicles has not met expectations, while ensuring that it will continue to improve fuel vehicle production. BMW and Audi, both representatives of luxury car brands, have also stated that they will not give up fuel vehicle production.
Thomas Peckron, vice chairman of the German Association of the Automotive Industry, pointed out that the demand in the automobile market is slowing down. The R&D investment of electric vehicles is large, and the production cost is higher than that of fuel vehicles. The development of electric vehicles is a big challenge to the profitability of enterprises. Therefore, many multinational automakers have chosen to adjust their "electrification" strategy and maintain the "dual-track parallel" approach of fuel vehicles and electric vehicles.
Since the EU announced the 2035 ban on fuels in 2022, there have been constant voices of opposition and dissatisfaction within the European automotive industry, with critics arguing that the 2035 ban is too radical. In Italy, which is famous for producing sports cars, a government minister publicly questioned that the forced transition to electric vehicles is a "suicidal act."
Thirdly, they are extremely unconfident in the face of competition from Chinese and American automakers. At present, Chinese automakers are at least on par with European brand manufacturers in terms of electric vehicle quality and digitalization, and they have an advantage over traditional European automakers in terms of software and batteries. Thomas Schaefer, CEO of Volkswagen Group's passenger car brand, believes that strong competition from Tesla and Chinese automakers in the United States has "endangered Germany's old automakers" and likened Germany's old automakers to "roofs on fire."
For more than a century, it has been normal for Europe to export cars and automotive technology to China. Now that China has achieved "overtaking in electric vehicles", Chinese electric vehicle exports to Europe have become a new historical trend. In 2023, electric vehicles made in China (including Tesla and EU brands) will account for 21.7% of the total electric vehicle sales in the EU market, far higher than 2.9% in 2020.
In order to protect European electric vehicle manufacturers, the EU decided to impose temporary tariffs on Chinese electric vehicles from July 4, and will later decide whether to impose formal tariffs for a period of five years. In the long run, the imposition of tariffs will not help European automakers improve their global competitiveness, and will only backfire on them in the end. Faced with the "headwinds" of EU policies, Chinese automakers may accelerate the pace of building factories overseas.
Faced with the huge gap between ideal and reality, only time can tell whether Europe's 2035 ban on fuel combustion can be achieved as scheduled.
Photo courtesy of Xinhua News Agency
