Whisper it behind closed doors, but the electric revolution in Europe might have made a false start.
The move to electric vehicles has reached a plateau and is helping to turn a problem in the industry into a crisis. The European industry is being undermined by a weak economy as sales overall weaken. The market isn't being helped by the curb on high-profit margin internal combustion engine vehicles by EU laws designed to boost EV sales. A sales onslaught from China isn't helping Europeans.
Europe's biggest carmaker Volkswagen (including VW brand, Skoda, SEAT, Audi, Porsche, Lamborghini, Bentley) has been forced to consider shutting factories and firing workers for the first time in its 87-year history. Multi-brand Stellantis (including Jeep, Chrysler, Dodge, DS, Peugeot, Citroen, Fiat, Opel, Vauxhall, Maserati), in existence for less than 5 years, is suffering similar problems.
EU politicians who designed the plan to force its citizens into EVs whether they like or not in the name of saving the planet from global warming might be forced to think again. Targets to drastically slash purchases of ICE vehicles in favor of EVs have met with great reluctance from the sedan and SUV-buying public. EV prices are too high, capabilities too poor versus ICE and the charging network insufficient.
This will come as no surprise to industry leaders like Stellantis CEO Carlos Tavares, who said this a couple of years ago.
"What is clear is that electrification is a technology chosen by politicians, not by industry," he said in a joint interview with newspapers Les Echos, Handelsblatt, Corriere della Sera and El Mundo, adding there were cheaper and faster ways of reducing carbon emissions.
Currently, the sales of EVs in Western Europe are running at about 2 million a year. That's less than 20% of the total. But EU and U.K. government regulations insist this should hit 80% by 2030 and 100% by 2035. Britain is even thinking of moving the 100% date forward to 2030.
Many industry experts have been cutting their forecasts and they now range between 38% and 60% EV market shares for 2030. More than quadrupling EV sales over 5-1/2 years looks impossible unless European politicians are prepared to bankrupt the industry by wilfully destroying the industry's ICE output. 80% of a ruined ICE industry would be much easier to achieve.
Pressure is mounting to abandon this unworkable directive and replace it with a mandate to find the best way to curb CO2 emissions, be it hybrid, plug-in hybrid, fuel cell, improved ICE, or EV.
Investment bank Morgan Stanely, in a report entitled "Global EVs: Plateau or Progression? Time for a Global Pivot", said it might be time for a rethink, including deals with Chinese companies.
"We expect growing economic uncertainties and geopolitical barriers to stall global EV adoption over the next 12-18 months. Ultimately, we think global alliances engaging Chinese smart EV tech with local market access will be critical to navigating macro challenges and reigniting EV momentum," the report said.
"While we believe mass EV adoption remains a long-term ambition for both the global auto industry and policy-makers, we think a more fractured macro environment and rapidly evolving EV tech require a more decisive role for multilateral collaboration," according to Morgan Stanley.
Morgan Stanley cut its global forecast for EV market share between 2024 and 2026 by three percentage points to 17%, with the key weakness in developed markets. Morgan Stanley said sales will re-accelerate between 2026 and 2030 to 32%, but that's a cut of eight percentage points from the previous estimate.
Western manufacturers will likely spend less on EV technical development, concentrating on affordability and collaboration. China's EV makers will be forced to be more cost-conscious, Morgan Stanley said.
Professor Ferdinand Dudenhoeffer, director of the Center for Automotive Research in Bochum, Germany, doesn't see the need for a reset.
"Morgan Stanley is wrong," Dudenhoeffer said in an email exchange.
Dudenhoeffer conceded that EV sales in Germany had fallen behind, mainly because the government dropped subsidies. Last week, the German government announced a revival of subsidies, which will need parliamentary approval.
"If we want to drive CO2-neutrality, the EV is irreplaceable. The only question is where the industry is heading in the future. China is the country of electromobility. They are building very systematically there. That is why BYD and not Toyota will be the measure of things in the future. It is important that we bring the EV market up more quickly in Europe," Dudenhoeffer said.
In Britain, the path to at least 80% EV market share by 2030 is causing problems, according to Cox Automotive analyst Philip Nothard. The target for 2024 is 22% EVs. Nothard wants the government to review the targets and introduce financial support.
"The tactics we are likely to see deployed by (manufacturers) and retailers to hit their numbers in the closing months of this year will be drastic, expensive and risky, creating an unrealistic and unnatural market with potentially far-reaching consequences over the long term," Nothard said in statement.
Chester Springs, Pennsylvania-based Auto Forecast Solutions analyst Sam Fiorani agrees the industry has got ahead of itself in the race to electrify.
"Spreading this transition across the next decade or more will mean the majority of new vehicle buyers will not be buying an EV this decade. Any hopes that the internal combustion engine will be history by 2030 should be long gone. Any "mandate" requiring this shift was premature and failed to take into consideration consumer preferences and needs," Fiorai said in an email.
Fiorani appears to agree with the Tavares mantra about engineering edits from politicians.
"Gradually tightening emissions regulations instead of requiring electric vehicles puts the pressure on engineers and executives to create cleaner products that will sell and make money. The market is seeing that now with the rise of hybrids, plug-in hybrids, and extended-range EVs. Eventually, when the infrastructure has been created, EVs and fuel cell vehicles will be able to flourish, but until then the marketplace will need to support these blended technologies," Fiorani said.
Morgan Stanley, in the report, said partnerships between global and Chinese manufacturers would help avoid an EV generated recession, exacerbated by political tensions, economic challenges and technology disruption.
The false start is based on the industry choosing the wrong kind of vehicle to lead the electric revolution. Part of the blame lies with EU regulators who designed rules allowing carmakers to profitably build massive, unaffordable technical tour de forces, while penalizing small cars.
After this misfire, in Europe at least, the industry needs to concentrate on what electric technology does best; make cheap urban runabouts that could, like the mobile phone, be successful because the product is affordable and irresistible.