TOIn recent years it has been difficult to get new, affordable electric family cars in Europe, especially those made in the EU. There were no launches of local electric models for less than €25,000 (£20,740) across the EU during 2022 and 2023, according to the Transport and Environment campaign group.
However, in recent months that has changed, with a flood of new cars ranging from the Fiat Grande Panda to the Citroën ë-C3, the Hyundai Inster to the latest Dacia Spring and Renault 5. Suddenly, buyers have options.
That’s not a coincidence. The EU’s stricter carbon emissions targets will come into force on January 1, meaning carmakers will have to sell more electric cars or face fines. New battle lines are being drawn: industry wants rules relaxed, while environmental campaigners urge the EU to stand firm.
Automakers around the world are struggling with faltering demand for their models, whether powered by batteries or internal combustion engines. The drop in profits came at a difficult time for the industry, just as it tries to find the money for the costly transition to electric vehicles (EV).
Globally, 2024 has been a record year for electric car sales, driven by the extraordinary growth of the Chinese industry. But the market in Europe has gone through a painful slowdown. Matthias Schmidt, a Berlin-based electric car analyst, forecasts a 1.4% drop in sales in the 18 largest markets in western and northern Europe over the past year (including 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 largest electric vehicle market. Will Roberts, head of automotive research at consultancy Rho Motion, said the end of the €5,000 per car incentives was “a pretty difficult thing to overcome” for consumers in the EU’s largest car market, and that the turmoil in German policy meant that “there had been no political or social motivation to change the situation.” France also saw a slowdown in electric vehicle sales, possibly not helped by the country’s own political uncertainty.
Schmidt said some automakers were performing better than others. Ford is struggling to sell electric models made in Cologne, but BMW and Stellantis have previously said emissions targets are not an issue. Electric-only brands Tesla and Polestar, plus the rapidly transitioning Volvo, are already well ahead of targets, meaning they can sell “credits” to rivals.
But the timing of the overall sales decline has alarmed politicians, as auto companies have blamed regulations for their plans to close factories. Volkswagen has sent shockwaves through Germany with a plan to close up to 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, UK.
In Britain, manufacturers have successfully argued that they need leeway on fines. The industry wants the same across the English Channel. The European Automobile Manufacturers Association (ACEA), an influential lobby group, has called for a “clear political declaration from the European Commission by the end of 2024” committing to relaxing emissions rules to save jobs.
There are signs that European authorities may be receptive. Commission president Ursula von der Leyen is scheduled to launch a “strategic dialogue” on the European car industry in January. Giorgia Meloni’s right-wing government in Italy is leading the push to relax emissions rules. German Chancellor Olaf Scholz has also expressed his willingness to ease the fines, although he will run for re-election in February after the collapse of his tripartite coalition.
Acea CEO Sigrid de Vries called on the EU to recognize that the rules risk “stalling the transition, rather than boosting it” and are harming European industry. “No one expected us to be in such a dire situation when it comes to the transition now. “We are in a very different world in many ways,” he said.
Acea hopes for changes such as allowing manufacturers to make up for missed targets with higher electricity sales in subsequent years. Another option is a gradual period that would effectively allow manufacturers to miss their targets in the first year.
Luca De Meo, Renault chief executive and Acea president, recently said the industry risked losing up to €16 billion in “investment capacity” if things did not change. The main risk he cited was fines. Car manufacturers will pay 95 euros for every gram by which average carbon dioxide emissions exceed the target of 93.6 g per kilometer.
However, the figure of 16 billion euros is in dispute. Lucien Mathieu, T&E’s automotive director, said this was based on sales in 2024, 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 €16 billion was an “about” figure illustrating the size of the change that needed to be “digested in some way,” rather than an actual forecast.
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New cars, just in time.
Whatever the actual cost, part of the calculation is the cost of heavy discounting to the industry. While automakers’ profits fall, it also benefits another important group, consumers, who pay less for the cars they depend on.
Five years ago, this newspaper reported that 2020 was going to be the year the electric car would go mainstream, when the first stage of the EU’s five-year rules came into force. The number of electric models launched in 2020 doubled that year to 19. According to data company Marklines, sales increased. This time something similar has happened: after 26 models of electric vehicles were launched in 2023, throughout 2024 there were 45 and at least another 35 are already planned to go on sale next year.
Roberts said it was credible to think automakers had held back models. “Sale of a BEV (battery electric vehicle) for VW in December it basically has no value for them,” he said. “If you can delay the sale of that electric vehicle until 2025,” then it will help avoid fines, Roberts said.
Mathieu agreed. “Automakers are holding off on launching more affordable models until next year. Why sell EV models this year when you’ll need them next year? asked.
For that reason, most analysts expect electric car sales to rise sharply in 2025 across Europe, leaving 2024 as a small blip before the transition accelerates.
But some analysts and activists worry that the lobby to relax the rules could harm the European industry in the long term. Every time European automakers stumble, the ranks of China’s electric vehicle startups, led by BYD, take another step forward. EU tariffs on Chinese cars, which range between 21% and 38.1%, are not believed to prevent companies from gaining customers across Europe.
“Weakening the targets will definitely not help the industry as it will fall even further behind the Chinese,” Mathieu said. It would be “rolling out the red carpet for Chinese manufacturers.”