Affordable and cheap electric family cars, especially those made in the EU, have been scarce in Europe for the past few years. There were no new domestic electric models priced below €25,000 (£20,740) in 2022 and 2023, according to the campaign group Transport & Environment.
However, in recent months, this has changed with the introduction of various new models, including the Fiat Grande Panda, Citroën ë-C3, Hyundai Inster, Dacia Spring, and Renault 5, giving buyers more options.
This shift is linked to stricter EU carbon emissions targets, which come into effect on January 1. As a result, automakers must sell more electric vehicles (EVs) to avoid penalties. This has led to a growing divide, with the industry seeking to ease the rules, while environmental groups are pushing the EU to maintain them.
Car manufacturers worldwide are facing declining demand for both electric and internal combustion vehicles, with falling profits at a critical time as they invest heavily in the transition to EVs.
While 2024 has been a record year for global electric car sales, driven by China’s industry, Europe has experienced a slowdown. Analyst Matthias Schmidt predicts a 1.4% drop in sales across 18 key Western and Northern European markets. One significant factor in this decline has been the removal of substantial subsidies for new electric vehicles in Germany, Europe’s largest EV market. Will Roberts from Rho Motion noted that the end of a €5,000 subsidy has been a major hurdle for German consumers, exacerbated by political instability.
Some carmakers are faring better than others. While Ford has struggled to sell electric models in Cologne, BMW and Stellantis have expressed confidence that emissions targets aren’t a major issue. Brands like Tesla, Polestar, and Volvo, which are fully electric or transitioning quickly, are already ahead of targets and can sell carbon credits to other manufacturers.
However, the overall decline in sales has raised alarm among politicians, as automakers have blamed the regulations for plans to close factories. Volkswagen, for example, is considering closing up to three factories in Germany, while Ford plans to cut 4,000 jobs in Europe, and Stellantis has suspended operations at its main plant in Italy and announced the closure of a van plant in the UK.
In the UK, manufacturers have successfully pushed for more leniency on fines, and the European industry is asking for similar flexibility. The European Automobile Manufacturers Association (Acea) is lobbying for a clear commitment from the European Commission by the end of 2024 to relax emissions rules to protect jobs.
There are signs that European policymakers may be open to adjustments. The European Commission’s president, Ursula von der Leyen, is set to begin discussions on the future of the European car industry in January, with Italy’s right-wing government, led by Giorgia Meloni, leading efforts to ease emissions rules. Germany’s chancellor, Olaf Scholz, has also shown openness to relaxing penalties, although his re-election bid complicates the situation.
Acea’s director general, Sigrid de Vries, warned that the current rules could stall the transition to electric vehicles and harm European industry. She emphasized that no one anticipated the current difficulties, noting how the situation had changed drastically.
Acea is advocating for changes like allowing manufacturers to make up for missed targets with higher EV sales in subsequent years or implementing a phase-in period that would let manufacturers fall short of their targets initially.
Renault CEO Luca De Meo and Acea president warned that the industry could lose up to €16bn in investment capacity if the rules remain unchanged, primarily due to fines. However, this figure is contested by some, including T&E’s Lucien Mathieu, who believes it is based on outdated data and doesn’t accurately reflect future sales.
Despite these challenges, the reduction in car prices benefits consumers, allowing them to purchase vehicles at lower costs.
Five years ago, it was predicted that 2020 would be the year when electric cars became mainstream. The number of electric models doubled that year, leading to a surge in sales. A similar trend has emerged now, with 45 EV models launched in 2024 and at least 35 more planned for the following year.
Analysts believe carmakers may be delaying the release of affordable models, saving them for 2025 to avoid penalties in the meantime. As a result, many expect a sharp increase in EV sales in 2025 across Europe, with 2024 being seen as a temporary dip before the transition to electric vehicles accelerates.
