European automakers are shaken by the approaching EV riot

Like the proverbial swan, appearing calm and in control yet working hard beneath the surface to evade potential predators, the European car industry gives off a healthy vibe. .

According to Auto Forecast Solutions, sales are on track and could reach a 7% increase in 2024, with steady but modest growth. Currently, EV Volumes, a subsidiary of J.D. Power, predicts that European passenger car and light van sales will only increase modestly by 3.1% to 15.2 million units, which is higher than the pre-COVID-19 sales volume in 2019. He points out that this is far short of the 18 million units achieved in 2017. First-quarter profits are expected. Make it impressive. Electric car sales are booming, but here’s the first sign of trouble. The electronic revolution that had dominated the popular charts so far in the 1920s suddenly stalled.

This is creepy. Major manufacturers, led by Volkswagen, are pouring huge amounts of capital into EV projects and are eager to see a quick return on their investments. Europe’s EV market has been driven by European Union regulations that require carbon emissions targets to be lowered annually until only new EVs are allowed by 2035. In 2025, CO2 regulations will be significantly strengthened. The penalties for failing to meet these goals are severe.

The problem is that European industry can’t produce EVs cheap enough to stimulate demand. However, China can and is preparing to threaten the weakest incumbent powers.

Stellantis CEO Carlos Tavares described this as a “Darwinian” survival of the fittest from what he called the third wave of Asian automakers.

“First there were the Japanese, who rose to prominence in the ’70s, then the Koreans in the ’90s. Now, the ‘China offensive’ is taking shape,” Tavares said.

Tavares predicts that within 10 years, as many as five of the world’s largest companies, including Stellantis, will be consolidated.

Meanwhile, panic is in the air as Renault, now looking dangerously small and threatening, surrounded by multi-brands such as Volkswagen and Stellantis, is calling for a new “Marshall Plan” in Europe. This is ostensibly an attempt to use EU funding to avoid Chinese competition in the entry-level small car market. If approved, Renault will no doubt use these funds as a haven to negotiate with Volkswagen for a possible affordable small car project.

Investment bank UBS said that to reach 100% of the new ICE ban, carmakers will need financial support from the EU or else the ban will have to be lifted.

Germany’s Berenberg Bank said Europe’s auto industry would see limited sales growth in 2024, but a hard landing in the transition year could be avoided. However, there are concerns about a slowdown in EV sales, putting pressure on prices.

“Competitive pressures on EV pricing and technology are intense and have now expanded beyond Tesla, with imports from China also increasing,” the bank said in a report.

“EV growth momentum is slowing in the US and Europe. A lack of ‘affordable’ options is also holding back sales volumes. “This situation should gradually improve as options priced below 25,000 euros ($27,100) will gradually come to market this year and next,” Berenberg Bank said.

The idea that a €25,000 EV is “affordable” is a concept accepted by the European industry and needs to change. For the EV revolution to be successful, a mass market must be built quickly. Industry experts say this means the price will be significantly lower, at nearly 10,000 euros ($10,850). The problem for Europe is that it doesn’t have the capacity to build these vehicles yet, but China has the capacity to build cars like the BYD Seagull and Wuling Bingo. Another fundamental issue for Europe is the possibility of the EU imposing tariffs. The EU’s decision is expected in the coming months.

According to Berenberg Bank, two trends are emerging as a result of the slowdown in EV sales.

· Hybridization seems increasingly attractive in the short term, especially in the premium segment. BMW may have an advantage thanks to its multi-energy platform.

· “Affordable” competition in the mass market segment has reignited discussions about platform sharing and partnering with smaller manufacturers like Renault who would benefit the most.

A few months ago, BMW was criticized for lack of ambition as it tried to combine EV and ICE production. Now seen as a wise move as EV growth stalls.

HSBC Global Research said slowing growth in EV sales could undermine plans to ban sales of new ICE cars by 2035 when the EU reviews regulations in 2026.

HSBC Research says in a report from its Future Transport Week conference that long-term private car ownership could face competition from what it calls ‘micromobility’, such as electric bikes and scooters. Stated. One thing manufacturers don’t have to worry about as much is autonomous driving. Manufacturers have spent large sums of capital developing this technology, not least because they fear that rivals will suddenly be caught off guard by technological advances.

“The timeline for autonomous driving appears to be shifting further into the future with cost and technology being key issues. Level 2/2+ autonomous driving capabilities could capture a large portion of the market by 2030 “L4 for robotaxis will likely require a geofenced environment, but the future of fully automated driving (Level 5) is more uncertain,” HSBC Research said.

An EU decision on the possibility of curbing imports from China if they are backed by excessive state subsidies is expected in November, but an interim ruling is likely in July.