EV demand slowdown in Europe
【Summary】Europe's electric car sales growth is slowing down as customers wait for more affordable models. Despite a 47% increase in fully-electric sales in the first nine months of 2023, automakers such as Tesla, Volkswagen, and Mercedes-Benz are concerned about high interest rates and a subdued market. Consumers are hesitant to purchase electric vehicles due to uncertainty about safety, range, and price.
Europe's electric car sales, which have been experiencing significant growth, are now slowing down as drivers await the arrival of better and more affordable models in the next two to three years. Despite a 47% increase in fully-electric sales in Europe during the first nine months of 2023, automakers such as Tesla, Volkswagen, and Mercedes-Benz are expressing concerns about high interest rates and a subdued market, which are deterring customers. Dealers in Germany and Italy, as well as research conducted by data analysis firms, suggest that consumers are not convinced that electric vehicles meet their safety, range, and price needs.
One of the main reasons for the slower uptake of electric vehicles is uncertainty among consumers. Many believe that the technology will improve in the near future and would rather wait for the next model than invest in a vehicle that may quickly lose value. Flavia Garcia and Tom Carvell in Edinburgh, Scotland, for example, are considering purchasing an electric vehicle due to an impending petrol and diesel car ban. However, they are deterred by a lack of charging infrastructure, concerns about battery life, and the higher price compared to fossil-fuel models. The average price of new electric vehicles in Britain is still 33% higher than that of traditional cars.
Furthermore, most new electric models targeting entry-level consumers will not be available until 2025 at the earliest. By then, they will face competition from an expanded Chinese lineup of electric vehicles in Europe. This delay in the availability of affordable electric vehicles has raised concerns among critics, who have warned that the lack of options would eventually slow down the growth of electric car sales. The recent weaker performance in September, along with negative sentiment surveys and comments from carmakers and dealers, indicate that the low growth era has arrived.
Automakers in the United States are also feeling the impact of weaker demand and higher costs. Ford and GM have announced delays in the launch of cheaper electric models and have reduced spending due to these challenges. However, the problem is cyclical, as demand will remain slow until more affordable electric vehicles are available. While the intention to buy an electric vehicle has remained constant in Germany over the past year, indicating stable interest, the number of people actually purchasing electric vehicles is not increasing at the same rate.
Low residual values also contribute to the hesitation among buyers, as companies and consumers often consider the resale value of a vehicle when making a purchase. This combination of low residual values, high supply, and low demand is referred to as the "valley of death," which the industry is expected to go through from 2024 to 2027. In order to stay competitive, automakers need to keep an eye on Tesla and Chinese brands, as falling behind in the electric vehicle market could have long-term consequences.
Overall, the slower growth in electric car sales in Europe can be attributed to a variety of factors, including uncertainty among consumers, lack of charging infrastructure, higher prices compared to traditional cars, and the delayed availability of affordable models. Automakers are now facing the challenge of meeting customer demands while also ensuring profitability in the evolving electric vehicle market.
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