The EV adoption is hitting a bump as the demand decreases. Volvo abandoned plans to only produce electric cars by 2030 while Volkswagen is scaling back its battery plant capacity. The pressure of the Chinese manufacturers increases while the EU is planning new tariffs to protect the European automakers, writes eToro analyst for Romania, Bogdan Maioreanu.
Volvo now expects that by 2030 to have a lineup that will include hybrids and not only EVs. Volvo Cars said in the statement that by 2030 it now aimed for between 90% and 100% of cars sold to be fully electric or plug-in hybrid models, while up to 10% would be so-called mild hybrids, where electric power only supplements the combustion engine. As the company considers that the balance between full electric and plug-in hybrids is the right portfolio, the market seems to point to a slightly different conclusion.
In July the EU sales of electric vehicles decreased almost 11% and plug-in sales dropped more than 14% compared with the same month of last year, according to the latest report of the ACEA – European Automobile Manufacturers’ Association. The only segment that rose was the hybrid vehicles one, with sales up more than 25%. This is consistent with the sales trend year to date where EVs are down 0.4% and PHEVs are down 4%, while hybrids are up 22%. This shows that while acknowledging the advantages of electrification consumers are not ready to pay the premiums for buying an EV or the difference in price for a PHEV.
The EV sales in Romania showed a greater decrease following the reduction of subsidies. In the first 7 months of the year, sales of EVs dropped 20% and sales of hybrids rose 43% compared with last year. But if we look specifically at July, the sales of electric cars dropped 40% while the sales of hybrids rose 71%, the largest in the EU.
The scaling back in the EV plans was evident at Ford which slashed the development budget by $12 billion. Mercedes-Benz also, while previously aiming to be half electrified by 2025 now sees this by 2030 but only if the market will allow it. Volkswagen is slashing in half the planned battery factories capacities mentioning that the plans will evolve with the market demand for EVs. Also is considering closing a large vehicle plant and a component factory in Germany, due largely to competition from Chinese rivals. Toyota is also scaling its EV production plans from its initial aim of 1.5 million EVs by 2026 to 1 million units.
Potential buyers in the US considering the idea of going electric for their next vehicle purchase want three main things: short charging times with conveniently placed charging stations, a 560km-plus driving range, and to pay roughly $US50,000 for a new car, according to a Boston Consulting Group study. While the charging stations part is complicated, traditional automobile manufacturers struggle with the manufacturing costs. The study estimates that traditional automotive companies currently lose around $6,000 on each EV they effectively sell for $50,000, after accounting for customer tax credits. Moreover, they will only be able to close half of this cost gap by making the right technology choices and economies of scale, and this is making them vulnerable to Chinese manufacturers’ price war.
All this leaves Tesla, the most held stock by individual investors on the eToro platform, in a better position. The company is profitable and is integrating the chargers and the electric vehicles under the same roof. While competing on price is difficult, Tesla is taking another route with its Full Self Driving software that can be a very strong differentiator, as the company recently announced that the new feature will come to Europe and China in Q1 2025, pending approval by regulatory bodies.
This year in Europe we are seeing decreases in the sales of petrol and diesel cars and a sizable increase in hybrids. This is signalling that the trip to electrification hit some bumps on the road but is still continuing, albeit on a different route that includes a gradual transition through hybrids, while keeping the internal combustion engines.
