By William Boston
European consumers are buying electric cars at a faster pace
than ever, encouraged by government subsidies and the availability
for the first time of models built by their favorite brands.
The boom is so strong that Europe passed China as the world's
largest electric-vehicle market last year. Its share of new
electric-car sales nearly doubled to 43%, while China and the U.S.
lost market share.
But Europe's surge relies heavily on government incentives doled
out during the pandemic, and analysts warn the momentum could be
reversed if and when that support is withdrawn. Most government EV
subsidies are limited in scope and due to expire by the end of this
"The market is extremely sensitive to government and company
discounts," said Arndt Ellinghorst, auto analyst at Bernstein
Research. "Once subsidies are taken away EV sales will collapse by
30-40% at least for one or two quarters."
Without the subsidies, EVs are still considerably more expensive
than equivalent combustion-engine vehicles. This isn't likely to
change until later this decade, analysts say, as battery prices
come down because of new technology, greater scale and
Europe's approach started with more sticks than carrots. The
European Union in particular has steadily tightened emissions
requirements, prompting the industry to roll out more electric cars
and hybrids, or face hefty fines.
When the pandemic hit, governments looking to cushion the
economic shock began targeting aid at industries on the front line
of the battle with climate change. A big part of this assistance
went into incentives for consumers to buy EVs, creating a surge in
The moves changed the perception among industry leaders that
there wasn't a market to justify the huge investments needed to
build electric cars.
"We have an incentive to build these cars...It helps make the EV
very attractive for the consumer," said Hakan Samuelsson, chief
executive of Volvo Cars, the Swedish car maker owned by China's
Zhejiang Geely Holding Group. "But long term these incentives and
tax breaks are not sustainable."
Car makers began rolling out new models in earnest last year.
Volkswagen AG, Europe's biggest auto maker, unveiled its ID.3 and
ID.4 models. Premium car makers such as BMW AG, Mercedes and Audi
launched high-end EVs. This year, Mercedes is set to launch the
EQS, which will be an electric and highly automated successor to
the flagship S-Class.
Around 65 new EV models launched in Europe last year -- twice as
many as in China -- and another 99 are slated to come to market
this year. That compares with 15 launches in North America last
year and a planned 64 this year.
Manufacturers say the incentives and an explosion in the number
of new EV models came together at the right time, energizing both
supply and demand.
"You have to have the right product on offer...That's what we
saw last year in Europe," said Britta Seeger, board member at
Daimler AG in charge of global sales. "The offer is better, and
subsidies are supporting sales."
The availability of EVs with familiar brand names is also
pushing sales. Hallgeir Langeland, a 65-year-old Norwegian
environmentalist and former politician, hasn't owned a car for 25
years, but when Ford Motor Co. rolled out a fully electric version
of its Mustang last year, he didn't think twice.
"I had to have it," he said, recalling the Mustang he drove in
his youth. Now he can't wait for it to arrive in March. "It's
The purchase was made easier by subsidies that have made Norway
the world's biggest EV market per capita, prompting a
tongue-in-cheek Super Bowl ad by General Motors Co. starring Will
Ferrell, who called on American consumers to buy EVs and crush
Christian Burg, who runs a business building energy-efficient
houses in Germany, had driven a diesel BMW X3 SUV for years. When
the government boosted subsidies for electric cars last summer, he
applied for a small-business grant and switched to the new iX3
plug-in hybrid version of the car.
"We received 3,750 euros [equivalent to $4,500] in cash
incentives," he said.
Sales of plug-in electric vehicles in Europe rose 137% to 1.4
million vehicles last year, outpacing China, which recorded a 12%
increase to 1.3 million, and the U.S., where sales rose 4% to
328,000, according to ev-volumes.com, a research group.
The state of Europe's market is reminiscent of China's
electric-vehicle trajectory years ago. Determined to leapfrog
Western markets, Beijing provided hefty subsidies for purchases and
required manufacturers to ensure that a certain percentage of new
cars produced each year were electric.
The effort helped spawn hundreds of startups and boosted the
share of EVs to more than 8% of new-car sales by mid-2019. Then
Beijing slashed incentives in June 2019 and sales plunged, with the
share of EVs falling below 5% by the end of the year. When the
pandemic hit, China's EV sales slumped further, raising doubts
about Beijing's ability to reach its goal of having them account
for 20% of new-car sales by 2025.
Beijing reinstated EV subsidies early last year but slashed them
again in January in a renewed effort to wean consumers off
In Europe, national governments are reconsidering plans to phase
out the current regime of EV subsidies at the end of the year.
Analysts suggest that governments in countries that produce a lot
of autos, such as Germany and France, could extend aid beyond this
While most industry leaders welcome government efforts to
jump-start new technology markets such as electric vehicles, auto
makers worry that subsidies will only have a short-term impact and
without broader structural changes won't create a self-sustaining
Instead, they urge governments to focus more on developing
infrastructure such as charging stations, providing support for
building battery plants, and taxing carbon-dioxide emissions.
Write to William Boston at firstname.lastname@example.org
(END) Dow Jones Newswires
February 28, 2021 05:44 ET (10:44 GMT)
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