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Strategy& Forecast: Electric Trend Reversal by Year-End - Limits as BEV Booster

In Europe, BEV losses are looming in the strong sales last quarter: Many OEMs are reducing their internal combustion engine stock to meet the stricter CO2 targets from 2025. Germany is losing its position as the leading market but is gaining again. China is increasingly manufacturing in Europe: 700,000 BEVs by 2030. BEV record in the USA due to leasing advantages. "Technology openness" threatens ramp-up.

BEV Booster: The consultants from Strategy& see the CO2 limits as a key factor for the EV ramp-up. | Photo: Kaufland
BEV Booster: The consultants from Strategy& see the CO2 limits as a key factor for the EV ramp-up. | Photo: Kaufland
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Even though Germany still lags behind in country comparisons, the strong September figures indicate a trend reversal that is likely to intensify at the turn of the year. This is shown by the current "Electric Vehicle Sales Review" from PwC Autofacts and Strategy&, PwC's global strategy consulting service, which evaluates new registration numbers in 21 selected markets worldwide. Against the backdrop of tightened CO2 targets in the coming year, manufacturers are pushing new models onto the market at increasingly attractive prices in the lower segments, which is expected to give the ramp-up new impetus.

Strong BEV Month in September in Germany Offers Hope

While China is consolidating its leading position, the European e-car market is stagnating and has hardly grown by 2% compared to the same period last year, according to the study. Germany recorded a record loss of -37% in the market share of BEVs compared to the previous year and also dragged down the European EU-5 market by 12%. In contrast, in the UK, BEV sales increased by 20% in the third quarter of this year and now account for 20% of total sales. As a result, Germany again loses its role as the leading European market for BEV new registrations to the UK in the third quarter of 2024.

However, BEV sales in September 2024 indicate initial signs of recovery in Germany, rising to the month's highest level of this year with a 17% market share. This was aided by more attractive BEV models coming onto the market at lower prices, as well as more growth in the fleet market.

Stricter CO2 Targets as BEV Boosters

Experts believe a trend reversal could come at the turn of the year: stricter CO2 targets will apply across the EU from January 2025. To achieve these and avoid fines, many OEMs will push their BEV sales to 2025 and reduce their combustion engine inventories in the last quarter of 2024. The transition to e-cars is not linear and does not follow a textbook path. Instead, dynamic acceleration alternates with stagnation, emphasizes Felix Kuhnert, Partner and Automotive Leader at PwC Germany.

"The call for technology neutrality and the extensive support for combustion engines in Europe impede the ramp-up of electric cars in Europe and endanger the industrial location. If we also want to return to the path of growth in Germany with the help of e-cars, an orchestrated approach by industry and politics is needed. Smart mobility needs smart incentives," adds PwC expert Kuhnert.

Protective Tariffs as a Pyrrhic Victory

The planned EU punitive tariffs could reduce Chinese electric car exports to Europe by up to 25% in the short term, but could have the opposite effect in the long run. Since the discussed tariffs only affect purely electric vehicles (BEVs) and not the currently more heavily exported plug-in hybrids (PHEVs), they therefore only partially influence China's leading position in the global electric car market. The punitive tariffs provide European manufacturers with some short-term breathing space, especially to temporarily better compete in the low and medium price ranges.

In the medium term, however, the protectionist measure could prompt Chinese OEMs to relocate their production to Europe. This would reverse the effect, as an overcapacity in European factories could arise. The establishment of a local BEV production in Europe by Chinese manufacturers is just as conceivable as production in the plants of European partners. Importing and assembling semi or fully disassembled vehicles or outsourcing to European contract manufacturers are also options for Chinese OEMs.

US Market on Growth Course

The electric car market in the USA is also on a growth course. In the fourth quarter of 2024, the market share of BEVs could break the psychologically important 10% mark. Especially BEVs and hybrids are very popular in the USA, growing year-on-year by 11% and 28% respectively. PHEVs, on the other hand, have a low market share of just over 1%, and are experiencing the first year-on-year decline in several quarters, unlike in China. One reason for this is the higher purchase prices of these vehicles.

The Charging Infrastructure is Also Improving in the USA

The BEV and hybrid boom in the USA is being driven by an increasingly well-developed charging infrastructure, a high variety of offerings, Tesla's provision of their Superchargers for other brands, and government lease subsidies through the Biden administration's Inflation Reduction Act (IRA). Leased electric vehicles can thus receive the full tax credit of $7,500, even if they were not produced in the USA.

"E-mobility has long been suitable for the masses and everyday use. Now it's about tapping into broad sections of the population with attractive offers. Above all, China and the USA are leading the way here. In China, government incentives for BEV entry-level vehicles and plug-in hybrids are showing effectiveness and significantly contributing to the significant market growth. In Europe, however, the measured CO2 value of PHEVs will rise in the coming years due to an EU legislative change and transform the bridging technology PHEV into a phase-out model," says Jörn Neuhausen, Senior Director and Head of E-Mobility at Strategy& Germany.

To remain competitive in the long term, the USA could be a role model for Germany. Attractive and government-subsidized leasing models not only reached investment-sensitive, risk-averse buyer groups. They also ensured a sustainable electrification of the market, as many vehicles enter the used car market after the lease ends, Neuhausen concludes.

Translated automatically from German.
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