EditorialCar sales

Electromobility in the slow lane

The road to a battery future is long and bumpy. There is a lack of affordable e-cars and a consistent political approach is missing as well.

Electromobility in the slow lane

Electromobility is only progressing at a snail's pace in Europe – compared to the high targets set by politicians, especially in Germany. In Germany, sales of e-cars rose by 11% last year to just over half a million. In the previous year, the pace had been much higher at plus 30%. In the EU as a whole, the UK and EFTA, 28% more pure battery electric vehicles (BEVs) were newly registered than in 2022: around 2 million. However, the share of 15.7% of all new cars is pretty paltry, especially in Eastern Europe – and even more so compared to China, where this type of drive now accounts for almost 24% of new cars.

In order to achieve more significant progress in electromobility more quickly in Europe on the way to the climate targets, three groups in particular are vital: Car manufacturers, buyers, and politicians. The supply of electric cars that are affordable for a large proportion of buyers is only growing slowly. So far, there are not even a handful of models with a base price below 30,000 euros on the German market. A recent survey by Deloitte in Germany shows the importance of this threshold: 55% do not want to spend more on a new car.

A devastating signal

The government's purchase incentive in the form of the environmental bonus, therefore, primarily benefited those who could afford more expensive cars. The subsidy has since been cancelled – initially for commercial buyers and suddenly in December for private buyers due to the federal budget disaster. From a regulatory point of view, cancelling the bonus is the right thing to do. There are no longer any windfall profits. However, the abrupt end sends a devastating signal for the predictability and reliability of politics.

The taxpayer subsidy was clearly not even necessary: Numerous car manufacturers will continue to pay not only the manufacturer's premium but also the state's previous share, at least for a transitional period. Politicians could now concentrate on the framework conditions. In addition to a dense charging infrastructure, this includes the supply of sufficient electricity from renewable energies, as well as raw materials for battery production.

From a seller's to a buyer's market

There has been some movement on the price side of the car market. The reasons: On the one hand, supply has increased as the supply chains for components are relatively stable again. On the other hand, inflation and interest rates are putting pressure on consumer sentiment. The seller's market, which was characterised by a lack of supply and brought manufacturers high-profit margins, has become a buyer's market.

For example, Volkswagen is offering a discount on the ID.4 that exceeds the previous environmental bonus. The Renault brand Dacia is also using such a move to woo buyers for the Spring Electric, the price of which has almost halved. Market leader Tesla got the wave rolling. Better vehicle equipment or more favourable leasing rates are other ways for car manufacturers to revive flagging demand and thus ensure reasonable capacity utilisation at their plants. In return, some companies accept that the profit contribution of individual models is not sufficient to cover fixed costs.

Growing doubts

In addition, the EU is breathing down manufacturers' necks with emissions regulations and the threat of penalties. In 2025, the carbon dioxide limit for fleet consumption will be reduced slightly from 95 to 93.6 grams per kilometre before a jump to 49.5 grams is to follow in 2030. However, the focus on this figure harbours false incentives: To date, manufacturers have mainly brought larger e-models onto the market in order to meet the fleet targets. The EU does not take into account the higher power consumption of these cars, especially SUVs.

The ban on new cars with diesel or petrol engines in the EU, set for 2035, is creating pressure to expand the model range downwards. However, given the gaps in the charging station network, there are growing doubts in politics and businesses that this will actually happen in eleven years.