European EV Sales Pause, Waiting For Cheap Mass Market Vehicles

Electric car sales in Europe have paused at base camp on the way to the summit. The next phase requires mass-market buyers and price is everything.

Unless there is a compelling value proposition, private buyers won’t part with their own money. The electric revolution is at stake.

Investment bank UBS said in a report in February that EV sales in Europe will hit 9.6 million in 2030, almost five times higher than last year’s just over 2.1 million. At the same time investment researcher Jefferies wasn’t quite so exuberant but still saw more than four times as many sales in 2030 at 8.9 million.

HSBC Global Research, in a report published in the middle of March, is at the high end, forecasting sales of 9.4 million by 2030 in Europe, for a market share of 60%. In the U.S., HSBC expects EV sales to reach 41% of the market by 2030.

These are brave predictions given the current state of the European, and to a lesser extent, the U.S. EV market. After surging since the early 2020’s growth has suddenly slowed, with the likes of GM and Ford in the U.S. and Mercedes and Volkswagen in Europe pulling back over-ambitious plans.

“Affordability, infrastructure and wavering government support/policy appear to be deterring consumers from making the switch to EV. This raises questions around what needs to change to make mainstream adoption a reality. Affordability is our main conclusion,” HSBC Global Research said.

“Despite slower adoption, EV competition is intensifying, which raises investor concerns over pricing and margins. This makes lowering costs the common ambition within the industry. Encouragingly, battery makers and supply chains are seeing progress in this regard,” the bank said.

The transition to EVs is progressing but at a slower rate than expected.

“We expect battery electric vehicle (BEV) penetration to continue to rise, but we have consistently downgraded our forecasts over the past 18 months. Arguably, we and others expected too much too soon. We have seen carmakers trim their ambitions (Mercedes most recently) and see further cuts should the ambitions of regulators also decline, as appears to be a risk in the U.S.,” the bank said.

Chester Springs, Pennsylvania-based Auto Forecast Solutions analyst Sam Fiorani agrees, saying EV sales growth is slowing and manufacturers are having to scale back production plans, even as governments insist on the opposite. Opposition to these rules from manufacturers is increasing, although it’s not clear yet if this will lead to any mitigation.

EU CO2 emissions regulations stipulate manufacturers’ EVs must comprise about 25% of all sales by next year, about 80% by 2030 and 100% by 2035.

The early surge from 2020 was fueled at first by well-heeled early adopters and followed by corporate purchasers, often propelled by tempting tax breaks. And of course, corporate EV drivers had no say in the choice and any shortcomings compared with internal combustion engines had to be lived with. This would include poor long-distance high-speed range and an incompetent charging network. The fact EVs were up to 50% more expensive than equivalent ICE machines while providing perhaps half the utility didn’t trouble this group.

EV aficionados declared it won’t be long until new technology like solid-state batteries make range anxiety and other negatives a thing of the past. Meanwhile, just slow down, slipstream the trucks, turn off the heating, air-conditioning and radio, and wear a coat and hat in the winter.

The EV market is now at an important pivotal point. The movement from 2 million sales to 9 million will mean the establishment of a mass market, and that assumes really, truly affordable EVs. The problem is that European manufacturers think €25,000 ($27,250 after tax) is “affordable” whereas average wage earners will recall until recently entry-level ICE cars could be bought for about €10,000 ($10,900). Currently, no European manufacturer can get close to that, but Chinese ones can.

On the way to 2030, each sale will be decided by buyers with their own cash or borrowing power. If they don’t see value for money, they will retain their gasoline, diesel or hybrids. The more adventurous might go for a…