{"type":"document","data":{"id":"f9bf51d5-72f6-4d6e-929a-5691cca6237b","localeString":"en-GB","publishDate":"2024-09-23T14:12:22.425+02:00","contentType":"onecms:editorialPage","hasMacro":false,"flexPageMetadata":{"afmBanner":false,"robotInstruction":{"noIndex":false,"noFollow":false},"description":"European carmakers are struggling with competing interests. Volvo’s about-turn on electric vehicles is an example of how many are now downplaying their EV commitments amid demand and profitability uncertainty. But short-term decisions won’t change the overall direction of EVs."},"mainHeaderZone":{"componentType":"editorialHeader","coreHeader":{"title":"European carmakers are struggling amid historic EV shift","body":"European carmakers are struggling with competing interests. Volvo’s about-turn on electric vehicles is an example of how many are now downplaying their EV commitments amid demand and profitability uncertainty. But short-term decisions won’t change the overall direction of EVs."},"backLink":{"textLink":{"url":"/en/business/sustainable-business","text":"Sustainable business"}},"date":"2024-09-06","readingTime":0},"flexZone":{"flexComponents":[{"componentType":"sectionTitle","title":"Competition from new entrants grows, but short-term reality prevails"},{"componentType":"paragraph","richBody":{"value":"<p>The European car industry is facing challenging times in keeping up with the historic transition to electric vehicles, while <strong>competition from new entrants like BYD mounts</strong>. It&apos;s fair to say that short-term interests are heavily influencing the course. </p><p>You can perhaps see that in the latest news from <strong>Volvo</strong>. It announced on Thursday that it&apos;s <strong>U-turned on its heavily promoted targets</strong> to produce only electric vehicles by 2030 as demand slows. </p><p>The shift to EVs is a non-linear journey with many uncertainties, as we have seen over the last couple of years. But it’s increasingly putting European carmakers under pressure while total <strong>new car sales fail to return to pre-pandemic levels</strong> in their home markets. Volkswagen’s CEO, Oliver Blume, sees the competitive environment becoming tougher and emphasises the importance of <strong>focusing on production costs and competitiveness</strong> as the group&apos;s global market share has started to erode with the uptake of EVs.</p><blockquote><p>Demand for EVs is currently stagnating in Europe as middle-class drivers are hesitant to make the shift, and lease and rental companies struggle with low residual values</p></blockquote><p>At the same time, Volkswagen, as well as several other European carmakers, including Ford and Mercedes, have announced <strong>plans to push back earlier targets to phase out sales of internal combustion engines</strong> (ICE-)vehicles in Europe. This is remarkable, so what’s going on? Well, there are a number of considerations behind this:     </p><ul><li>Due to production costs and severe competition, <strong>margins on BEVs are still poor</strong> and much lower than on plug-in hybrids, PHEVs, conventional hybrids HEVs or petrol cars. Pushing too hard would hurt profitability in the short run.</li><li>Demand for EVs is currently stagnating in Europe as <strong>middle-class drivers are hesitant to make the shift</strong>, and lease and rental companies struggle with low residual values.</li><li>The <strong>European EV supply chain still needs time to develop</strong>, while lower lithium-ion battery prices, and Chinese levels dropping below $100 per kWh challenging new local facilities. Meanwhile, <strong>carmakers still depend on China</strong>, which entails risks.</li><li>Carmakers made their ICE phase-out pledges prior to the final decision by the European Union and UK to <strong>enforce 2035 as the deadline to make the shift</strong>. This gave manufacturers more spare time compared to the initial proposal (2030).</li><li>Carmakers also seek flexibility in the current <strong>uncertain (fiscal support and trade) policy environment</strong>, with government changes potentially having a significant impact.</li></ul>"}},{"componentType":"paragraph","title":"Electrification temporarily decelerates in Europe, but continues globally","richBody":{"value":"<p>Share of electric vehicles (BEV*) in total new car registrations per region </p><p><small class=\"footnote\">Source: BNEF, ACEA, ING Research *forecast</small></p>"},"alignedImage":{"position":"bottom","transformBaseUrl":"https://assets.ing.com/transform/0670b2dd-829c-478c-b7c1-10e8fc56c0d2/BEV_shares","original":"https://assets.ing.com/m/1fd912a579203cfe/original/BEV_shares.png","extension":"png"}},{"componentType":"sectionTitle","title":"EV product shift still requires speed to avoid missing out on long-term performance"},{"componentType":"paragraph","richBody":{"value":"<p>Amid all the short-term interests and uncertainties, carmakers realise they can&apos;t afford to miss out on EVs, and the direction of travel remains clear. <strong>The EU is not expected to soften its CO2 targets</strong> for production either. This means EV investment programmes and new model development still require speed.</p><p>The decision to temporise the shift is very much intended to maintain profitability and preserve flexibility in a highly uncertain environment. <strong>Western EV sales are slowing for several reasons, but this is a temporary development.</strong> The direction of travel has not changed, and investments in the makeover of product portfolios still need to continue to secure long-term positions in the market over the next decade.   </p>"}}]}}}