The Volvo logo is displayed at the Volvo Cars Hill Country dealership in Austin, Texas on September 4, 2024.
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European car manufacturers are facing numerous challenges on the road to full electrification, including a lack of affordable models, a slower-than-expected expansion of charging stations and the potential impact of European tariffs on electric vehicles produced in China.
Volvo Cars announced on Wednesday that it had abandoned its much-publicized plan to sell only electric vehicles by 2030, citing the need to be “pragmatic and flexible” in light of changing market conditions.
The Swedish automaker announced that by 2030, 90 to 100 percent of its cars sold will be fully electric or plug-in hybrid models. According to the company, up to 10 percent of its sales by that date will be a limited number of mild hybrid models.
The crisis-hit Volkswagen and several other car manufacturers, including ford and the Mercedes-Benz Group have announced that they will postpone previous targets for the gradual phasing out of sales of vehicles with combustion engines in Europe.
“I think many manufacturers are obviously going through this process [of delaying electrification targets] right now. We're seeing it across the industry,” Tim Urquhart, senior automotive analyst at S&P Global Mobility, told CNBC's “Squawk Box Europe” on Monday.
“Many manufacturers who had more or less stopped investing in combustion engine technology have realized that if they don't continue to invest, they will not be competitive. Then they will no longer have the products that people want to buy in the showrooms,” he added.
Urquhart said governments in key markets have taken action to encourage people to buy battery electric vehicles (BEVs), with mandated targets. a trend he described as “increasingly problematic.”
For example, the UK has passed a rule requiring 22 percent of new car sales this year to be zero-emission vehicles. This rule, which aims to reduce the number of polluting vehicles on the road, will increase annually until it reaches 100 percent of new car sales in 2035.
“There needs to be a certain amount of pragmatism from both regulators and manufacturers. Manufacturers are probably ahead of regulators on this issue,” Urquhart said.
“The manufacturers are the only ones who see what customers want to buy right now, and it's not as many battery-powered electric vehicles as everyone expected,” he added.
“Collective overzealousness”
Announcing its revised electric vehicle plan last week, Volvo Cars outlined a number of challenges facing the automotive industry's electrification ambitions.
The automaker said the expansion of charging infrastructure had been slower than expected, government incentives had been withdrawn in some markets and recent tariffs on electric vehicles in various markets had created additional uncertainty.
Volvo Cars said these developments showed that “stronger and more stable government policies” were still needed to support the move away from fossil fuels.
A Volkswagen ID4 electric car is being charged at a charging station in a parking lot at Autostadt Wolfsburg. Volkswagen AG invites its shareholders to the Annual General Meeting.
Image Allianz | Image Allianz |
Asked whether some of these challenges facing the industry were likely to deter people from buying electric vehicles, Urquhart replied Monday: “Well, I mean, that's the point.”
“There seems to be a daily news cycle of anti-BEV sentiment in the mainstream media. A lot of it is not particularly well researched … but a lot of it is true,” Urquhart said.
“Consumers are faced with a very, very difficult choice. The same technology paradigm has been in place in the industry for 130 years, and we are asking consumers to completely change the way they drive and use their vehicles and charge them instead of filling them with gasoline,” he continued.
“I think there was a kind of collective overzealousness on the part of regulators, [original equipment manufacturers]maybe in some ways on our part, for BEVs. Without really understanding that it is very, very hard to get most mainstream consumers to completely change the way they use and operate their vehicles.”
“A non-linear journey”
However, analysts have made it clear that despite the short-term uncertainties, automakers recognize that they cannot afford to miss the electric vehicle market. The direction of development remains clear.
“The shift to electric vehicles is a non-linear process with many uncertainties, as we have seen in recent years. But it is putting increasing pressure on European carmakers at a time when total new car sales in their home markets are failing to return to pre-pandemic levels,” said Rico Luman, senior sector economist for transport and logistics at Dutch bank ING, in a recent research note.
Luman said the decision by some European automakers to delay the switch to electric vehicles was “primarily aimed at maintaining profitability and maintaining flexibility in a highly uncertain environment.”
He added that the decline in electric vehicle sales in the West had several reasons and was likely only temporary.
“The direction has not changed and investments must continue to be made in redesigning product portfolios to secure long-term positions in the market over the next decade,” Luman said in a note published on September 6.
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