Europe is bracing for a rebound in electric vehicle sales this year, with automakers bringing more than 160 models to market, but executives warn profits could fall further due to regulatory costs and rebates.
Growth in Eve Sales across key European markets ground to a halt last year, as governments cut subsidies and companies held off on producing new electric vehicle models until 2025 in anticipation of new, tougher emissions rules on the continent.
Matthias Schmidt, an independent auto analyst, predicted that electric car sales in 2025 in Western Europe, including the UK, will jump 40 percent to 2.7 million cars, as carmakers rush to meet CO2 targets. He expected the share of battery-powered cars to exceed the range of 15-17 percent, to 22 percent of the total market this year. “We definitely expect the market to rebound in 2025 due to the regulatory push from the EU,” he said.
But a return to growth in electric vehicle sales will also come with higher costs to meet stricter emissions rules and more discounts as consumers seek more affordable cars. With underlying demand remaining weak, executives said the overall outlook for the European auto industry remains challenging at a time of increasing Chinese competition and rising protectionism in the United States.
“In terms of the offer between electric and hybrid cars, we are ready,” said Fabrice Kamboulev, who heads the Renault brand, where 13 percent of its sales are electric. “In terms of demand, we are seeing very volatile signals. The hesitation level is really high among our customers.
European car industry body Acea estimated that fines, carbon credit costs or sales of electric vehicles at a loss could cost carmakers €16 billion if fines are not delayed to 2025. Its preliminary data showed that new electric vehicle registrations in Europe fell by about 6 percent in the year. the past.
Shares of electric car maker Polestar fell 11 percent on Thursday after it revealed it would take another two years for its free cash flow to become positive and it scaled back its market expansion plans.
Schmidt expects there will be more than 160 electric cars available this year in Europe, including cheaper offerings under €25,000, such as the Renault 5 and Citroën ë-C3. The range also includes 20 new models such as BMW's Neue Klasse electric SUV, Mercedes-Benz's new electric CLA, while Tesla's updated Model Y Released in China on Friday He will also head to Europe.
With the record number of product launches in the company's history starting in 2025, Mercedes-Benz CEO Ola Källenius said the company “will launch a range of products, most of which will be fully electric.”
But he warned that consumer “natural demand” was unlikely to rise in 2025 to a level that would allow the industry to sell battery-powered cars at good margins.
Starting this year, the European Union will require carmakers to reduce carbon emissions by increasing the share of electric cars sold. Carmakers and analysts are closely watching the UK, which last year launched an electric vehicle quota scheme that requires 80 percent of car sales to be zero-emission vehicles by the end of the decade.
Performance in the UK during the first year of electric vehicle targets provides an early indication of how regulatory pressure will impact sales and profits.
Registrations of new electric cars jumped by 21 per cent to a record 382,000 cars last year, with the UK narrowly overtaking Germany as the largest market for battery-powered cars in Europe for the first time.
However, discounts on electric vehicles attract them Customers are hesitant The shift away from petrol cars has cost carmakers billions of pounds. Despite price cuts, companies accounted for a significant portion of electric vehicle sales, with only one in 10 private buyers choosing the electric model.
Mike Hawes, chief executive of the UK Society of Motor Manufacturers and Traders, warned: “The amount of money available to stimulate demand will be under severe pressure when manufacturers have very limited resources.”
Analysts expected that weak profits in Europe would lead to a decline in global performance in automakers. UBS estimates that earnings before interest and taxes (EBIT) for European auto groups will fall by 7 percent compared to 2024.
While companies have a strong interest in selling more electric vehicles this year, “the question is how much additional discounting will we see from automakers to sell more electric vehicles,” UBS analyst Patrick Hommel said.
On top of the discounts and promotions, some manufacturers will face the additional cost of purchasing carbon credits from companies like Tesla and Chinese competitors Which is moving forward with the electric transition, in order to meet new EU regulations.
This month, Stellantis, Ford, Toyota, Mazda and Subaru announced plans to “bundle” carbon emissions with Tesla, allowing it to buy emissions credits, while Mercedes-Benz wants to work with Geely-owned Volvo and Polestar.
Hummel estimated that these various measures, including reductions and carbon credits, to achieve the targets would have an impact of up to four billion euros on profits industry-wide.
While the European auto industry is calling on Brussels to consider making regulations more flexible, it also hopes that governments will help revive consumer demand for electric vehicles by reinstating incentives.
New electric vehicle registrations in Germany collapsed by 27 percent last year after purchase subsidies were abruptly removed at the end of 2023. France suffered a 3 percent year-on-year decline and a 21 percent drop in December alone.
Some governments are starting to heed concerns about the targets, with Britain considering ways to make it easier to meet mandatory electric car sales targets. France has proposed exempting carmakers from large fines that would be imposed if they fail to meet EU emissions rules.
But it is still unclear where the political discussions will settle.
In France, a popular leasing scheme for less affluent families to buy electric cars ended in February 2024, after 50,000 orders in two months were more than double the total expected over a year.
Paris reduced support for the purchase of electric vehicles from a maximum of €7,000 to €4,000 last month, but since the French government has not yet passed a budget for 2025, further support for electric vehicles or penalties for polluting vehicles remains unclear.
In Germany, uncertainty over subsidies affected electric car sales.
Gilles Le Born, Renault's head of engineering, said the German government's cancellation of the incentives was “immediate”. Above all, he added, carmakers “need policy stability around electric cars” and “often it is 1,000 or 2,000 euros (in support) that can turn things around one way or another.”
