The long and winding road

Electric cars that got off to flying starts when new now falter. Fiat is to suspend production of the electric 500e, at its historic Mirafiori plant in Turin. It cites ‘the current lack of orders linked to the deep difficulties experienced in the European electric car market’. Renault has cancelled a stock market listing of its EV subsidiary, citing weak demand.

Lotus’s new-generation cars are all electric – first the Eletre SUV, then the Emeya GT, and in a few years a new BEV sports car too. Two weeks after it was listed on the Nasdaq, its share price collapsed by two-thirds.

The news isn’t much better for the EV specialists. Tesla’s market value has almost halved since 2021 and it recently laid off 14,000 workers. In the world’s biggest EV market, China, its share of the electrified sector has slipped to 6.5 per cent this year, from 2023’s 9.0. In Europe in July, BMW sold more fully electric vehicles than Tesla.

On a brighter note, last year the Model Y was the world’s best-selling car. It was Europe’s best-selling car, too, the first EV to do so, and the first non-European car. That’s an extraordinary achievement. Tesla sold a record 1.81 million cars globally, up 38 per cent on 2022. And its market capitalisation is still bigger than the next eight biggest car makers combined. In the minds of investors, it remains a tech company not a car maker. (Toyota is the second most valuable car company, BYD third, while luxury brands Ferrari and Porsche sit fourth and fifth respectively.)

Over at ‘Europe’s Tesla’ – Polestar – the news could scarcely be grimmer. The Chinese-owned, Swedish-headquartered, Volvo-affiliated EV specialist has seen sales drop, losses deepen, its share price collapse and its founding CEO depart.

Global sales are down 27 per cent on last year, at 20,371 for the first six months of 2024. Its goal was to sell more than 155,000 cars annually by 2025. After losses deepened to $1.46bn, charismatic CEO Thomas Ingenlath – the former Volvo design boss – quit. The share price in early September stood at $1.58, down from a high of more than $15 in November 2021. Europe’s most high-profile EV-only car brand has struggled with falling sales and profitability hammered by the need for hefty discounting.

The premium EV market is also brutally competitive, and home to well-resourced BMW, Mercedes and Audi (and Volvo) – all much better recognised brands. Little wonder there are calls to bring Polestar into the Volvo family as a sub-brand – which of course is where it started.

The recent launch of the Polestar 3 and 4 should help. Until now, Polestar has been a one model brand, the 2.

And if disappointing sales, big losses and collapsing EV residual values aren’t enough to keep European car bosses awake at night, there’s China. The epicentre of the world motor industry is moving decisively east, and Europe’s once dominant (and economically crucial) motor industry is imperilled like never before.

Europe now has a £74bn trade deficit with China on electric cars. EU officials say many of the 13 million jobs which rely on the auto industry are under threat.

More European makers move production to China. Already the BMW iX3, Volvo EX30, Citroën C5X, all Smarts, two new electric Lotuses, the DS9 and new Dacia Spring are Chinese built – never mind their European branding. So are UK-bound Tesla Model 3s, all MGs and all Polestars. A new Cupra SUV is being built there too. A quarter of all EVs sold in Europe this year are likely to be Chinese made. Little wonder the EU has just introduced tariffs, despite fierce opposition from China-dependent German makers, fearing reprisals.

Sales of electrified vehicles in China boom, helped – unlike in Europe – by continuing incentives. They’re up 30 per cent, boosted by growing demand for PHEVs.

Sadly, this has not helped Europe’s car makers to sell in China. Foreign brands that once dominated what is now the world’s biggest car market make up just 37 per cent of Chinese car sales, down from 64 per cent in 2020. The Chinese now buy local brands, especially when it comes to electric cars.

For the first time, Chinese car brands outsold US car brands globally last year.

While the short- and medium-term future is uncertain, all major car makers and major global legislators agree the long-term future is electric – and probably battery electric, although some makers (Toyota and BMW among them) still believe hydrogen fuel cells hold great promise. What’s much less certain is the timeframe and roadmap to get to full electrification.

The EU still plans to ban new internal combustion engine cars by 2035. Britain’s new Labour government is sticking with 2030, with hybrids continuing to 2035. But the exact type of hybrid is still to be determined leaving a potential loophole for scarcely hybridised cars boasting little more than 48-volt ISG (integrated starter generator) mild hybrids to stay in production. Singapore and Israel have a similar timeframe. Twelve US states, led by California, plan to ban new petrol cars by 2035. China wants ‘the majority’ of cars to be zero emission by the same deadline. In developing markets, new petrol cars will live on for much longer.

Luca de Meo, boss of Renault and president of the European car makers association ACEA, wants to stick to the 2035 EU rule. Having invested billions in electrification, European car makers don’t want to go back to combustion. ‘There is no way we can go back to square one,’ de Meo says. Rather, car makers want the reintroduction of incentives – EV sales stalled when they were withdrawn in the UK and the EU – and a much better charging infrastructure.

Most also want a more manageable path to net zero. This includes revising the EU’s 2025 plans to reduce fleet CO2 emissions to 95g/km – which essentially means a 20-22 per cent EV share next year (from today’s stagnant 12.5 per cent). ACEA wants this extended by two years, although not all makers agree, including Stellantis’ Carlos Tavares. He believes they’ve had enough time to get their act together.

Car makers also complain about the UK’s ZEV Mandate, which starts this year by insisting 22 per cent of all sales are EVs, rising to 80 per cent by 2030 (currently it’s running at 17 per cent). Clearly, this year’s target is unlikely to be met. In both the EU and UK, failure to meet the targets means stiff financial penalties (up to £15,000 per non-compliant car in the UK). Faced with such penalties or, arguably worse, having to buy ‘credits’ from companies with a surfeit of EVs, some companies, Ford included, are considering simply selling fewer ICE cars to make sure they comply.

Even more, car makers want a coherent European industrial policy – which has been sorely lacking in Britain too. As former Italian PM Mario Draghi wrote in a recent report on EU competitiveness: ‘The automotive sector is a key example of lack of EU planning, applying a climate policy without an industrial policy.’

Car makers want certainty and consistency. Britain’s EV sales stalled (and private sales fell) when the last Conservative government extended the combustion ban to 2035 (quickly reversed back to 2030 when Labour came to power).

Volkswagen chairman Hans Dieter Pötsch (who succeeded Ferdinand Piëch) wants European targets ‘adapted to reality. The e-mobility trend will prevail. But it will take more time.’ Herr Pötsch’s words will probably prove prophetic. So will former Ford of Europe boss (and new Volkswagen sales and marketing chief) Martin Sander’s warning against artificial targets: ‘You can’t push EVs into the market without the demand.’

In the latest EV roadmap, the first European legacy car maker to go all-electric is likely to be Jaguar, beginning in 2026. That’s when the first of its new breed ‘modern luxury’ EVs – a four-door GT – hits the road. Jaguar MD Rawdon Glover recently told me he wasn’t concerned about Jaguar going all-EV while EV demand disappoints.

‘The new Jaguars will be “want one” cars. Wealthy buyers will want one irrespective of their powertrain. But I’d be nervous if we were still in the upper premium electric car market. That is much more cutthroat and fickle.’

Still in the luxury world, Ferrari says it remains committed to the introduction of its first fully electric car in 2025, with sales starting a year later. CEO Benedetto Vigna says he expects to appeal to traditional Ferrari customers and, additionally, tech-savvy newcomers to the Prancing Horse.

Nor is he setting targets to phase out combustion cars. Maranello will make combustion, PHEV and electric models, to be split according to customer demand, not pre-planned targets. The new EV will be built in Ferrari’s recently opened E-building, which comes on stream in January. Expect class-leading EV driving, exquisite style, a high price (from $500,000, speculates Reuters) and almost certainly a waiting list.

Previous EV pacesetter Volvo now says 90-100 per cent of its sales by 2030 will be electric ‘or plug-in hybrid’. Ford of Europe, another maker to reverse its previous all-EV 2030 commitment, now says it will continue to sell hybrids for as long as customers want them. It plans to go all-electric by 2035 – meeting but not exceeding EU requirements.

BMW now expects 50 per cent of cars sold globally to be fully electric by 2030. It is one of the few legacy car makers to continue to prosper, partly because it offers a wide choice of fully electric, PHEV or combustion cars. And partly because its electric vehicles sell well – up 34 per cent globally in the first six months of this year. Its Rolls-Royce and Mini divisions will go fully electric by ‘the early 2030s’.

BMW also increasingly produces platforms that can flex from electric, PHEV or combustion powertrains.

Volkswagen says in Europe it will produce EVs only by 2033. By 2030, 80 per cent of cars sold will be fully electric.

In the past few months there has been some EV good news. In Britain in August, EV sales jumped by just over 10 per cent to a 22.6 per cent market share (17.6 per cent year to date, up from 16.4 per cent last year).

In America in July, EV sales surged by 18 per cent, helped by car maker and government incentives. (Year to date they’re up 8.7 per cent). A key reason was the success of the new Tesla Cybertruck. Production has been ramped up and it’s now America’s best-selling vehicle costing more than $100,000.

There is a lesson here for all makers: nothing boosts sales like a hot new product.