This year, the wave of EVs is hitting Western Europe

By Jeff Lee 2022-08-26

Today, global car markets are closer to each other than ever; aside from the automakers’ supply chain, car sales have also been affecting each other considerably. For example, because the Chinese market has more than half of the world’s new energy car sales, international brands have been flocking to China to develop BEVs. Consequently, the research and development result will eventually spread to factories in other regions, mainly less advanced European ones. Being the de-facto global leader in promoting green vehicles, the EU is now feeling multiple pressures: the net-zero timetable, the transformation of traditional car industries, employment rates (the EV industry requires less direct labor), and foreign brands’ growing challenge (back then, US and Chinese brands rarely have a chance in the European market). Despite all this, I can assure you that EVs will take over the long reign of ICE cars in European markets and even overcome their market share in 2025 or 2026.

The Taiwanese passenger vehicle market has been ignoring diesel models, deeming them low-tech and cheap products (pairing with the impression of low-quality diesel in early gas stations), despite many brands’ advertisements. However, the situation is different in Western Europe, the base camp for diesel cars. Diesel cars have always been the local favorite due to their high torques and lower fuel consumption, and achieved a record-high sales mix of 55% in 2011. Although sales have slumped year after year following the Volkswagon diesel gate in 2015, diesel cars still managed to stay on the scene. Even so, the trend has changed since the end of last year. In Western Europe, where this year’s car market size has shrunken 11% compared to last year’s figures, ICE car, HEV, and PHEV sales have all gone down, yet BEV sales have been increasing steadily, surpassing diesel models for the first time, and aiming to pass petrol cars with over 20% of the sales mix. As a result, the ever-changing environment of the car market spurred governments to dwell on the idea of lowering BEV subsidies to clear out the excessive ICE car stock of many brands. On the other hand, ICE car sales in crude-oil-dependent West Europe will be hindered by the rising oil price due to the Russo-Ukrainian War. The next one or two years will be harsh for the production and sales of European automakers.

Despite a far smaller market size than China and the US, Europe still boasts many prominent automakers and mature consumer behavior, making it one of the focus of the global car market. Aside from BEVs and PHEVs replacing diesel cars as the second choice for customers this year (petrol cars still are the first choice) , the unstable supply chain alone has contributed the most to the decline of the European market. On a global scale, Europe and the US were the biggest victims of a deeply disrupted supply chain: the chip shortage in the last half of 2020 worsened in 2021 due to an increased demand for EVs (EVs requiring more chips) pairing with the following power battery shortage. On the contrary, these supply chain problems have little impact on Asian car industry giants such as China, Japan, and Korea due to their prosperous chip and battery industries. Simply put, the need for BEV models in the Western European market is far greater than the actual sales figures. Below are some other examples of potential boosts for the market in the future:

 

  • The Gigafactory Berlin-Brandenburg of Tesla just started its production in April has shut down in July for two weeks, adding a shift to achieve a higher production capacity. Afterward, the factory will produce Model Y Long Range with the advanced 2170 cells non-stop if the supply chain can keep up, aiming to manufacture 1,000 units per week, 500k units per year for European market.
  • Chinese self-owned brands’ BEV models have entered the European market in recent years. Possessing the advantages of price positioning and new AI techs, Chinese brands will prove to be overwhelming opponents for traditional European automakers that have always focused on mechanical engineering. One thing’s for certain, the underlying need for budget BEVs will continuously boost the BEV market share in Western Europe.
  • The CAFE standards regulating the fuel economy of cars will prompt car brands to clear out their excessive ICE car stocks and speed up the development, manufacturing, and sales of EV models. I believe these car brands will never accept the grim reality where they need to buy regulatory credits (a credit closely related to the more-renowned carbon credit) from Chinese car brands.

Currently, the top two best-selling BEV brands are Volkswagon and Tesla in the European market. These two brands sold 120k and 110k units last year, respectively. Just like the skirmish of future EVs, these figures and ranking are only drops in the ocean. Adding Chinese self-owned EV brands to the mix of replacing ICE cars with BEVs, the future European car market will undoubtedly be a cut-throat fight of BEVs, and ICE cars will fade into the past, just like their diesel counterparts ten years ago.