European carmakers braced for tough 2025 despite ‘firework’ of launches

Europe is poised to resume sales of electric cars this year, with automakers bringing more than 160 models to market, but executives warn that profits could fall further due to regulatory costs and rebates.

Growth in EV: Sales in key European markets ground to a halt last year as governments cut their subsidies and companies held back new EV models until 2025 in anticipation of the continent’s stricter new emissions rules.

Independent car analyst Matthias Schmidt predicted that EV sales in Western Europe, including the UK, would grow by 40 percent to 2.7 million vehicles in 2025 as carmakers rush to meet CO₂ targets.He predicted that the share of battery-powered cars will go out of the range of 15-17 percent, making up 22 percent of the total market this year “We expect the market to return in 2025 due to regulatory incentives from the EU,” he said.

But a return to EV sales growth will also come with tougher emissions regulations and more discounts as consumers seek affordable cars.With underlying demand still weak, executives say the overall outlook for the European auto industry remains a challenge. a time of increasing Chinese competition and growing protectionism in the US.

“In terms of supply, between electric and hybrids, we are ready,” said Fabrice Kamboliv, who heads the Renault brand, where 13 percent of sales are electric. “In terms of demand, we see signals that are very volatile. The level of fluctuation among our customers is really high.”

European car industry body Acea estimated that fines, carbon credit costs, or sales of EVs at a loss, could cost carmakers €16 billion if fines are not delayed for 2025. Its preliminary data showed that new EV registrations in Europe fell last year are almost 6 percent.

Shares in electric car maker Polestar fell 11 percent on Thursday after it said it would take another two years for its free cash flow to turn positive and scaled back plans for market expansion.

Schmidt expected more than 160 EVs to be available in Europe this year, including cheaper offerings under €25,000 such as the Renault 5 and Citroën ë-C3. The lineup also includes 20 new models, such as BMW’s Neue Klasse electric sports car and Mercedes-Benz’s new electric CLA, while Tesla’s updated Model Y. released in China on Friday will also go to Europe.

Launching a record number of products in the company’s history, starting in 2025, Mercedes-Benz CEO Ola Kellenjus said the company will “launch a fireworks display of products, most of which will be fully electric.”

But he warned that “natural demand” from consumers was unlikely to grow to a level in 2025 that would allow the industry to sell battery-powered cars at healthy profit margins.

The EU will require carmakers to cut carbon emissions by increasing the proportion of electric vehicles they sell from this year.Carmakers and analysts have been closely watching Britain, which last year launched its EV quota scheme, which requires 80 percent of car sales to be zero-emission vehicles by the end of the decade. that’s it.

Performance in the first year of electricity generation targets in the UK gives an early indication of how regulatory pressure could affect sales and profits.

New EV registrations rose 21 per cent to a record 382,000 last year, with the UK narrowly overtaking Germany to become Europe’s biggest market for battery-powered cars for the first time.

However, discounts for capturing EVs customers reluctant Abandoning petrol-powered cars cost carmakers billions of pounds Despite the price cuts, businesses made up the majority of EV sales, with only one in 10 private buyers opting for an electric model.

“The money available to stimulate demand will be under severe pressure when manufacturers have very limited resources,” warned Mike Hawes, chief executive of the UK Motor Manufacturers and Traders Association.

Analysts predicted that weaker profits in Europe would drag down global performance for automakers, with UBS estimating that earnings before interest and taxes for European auto groups would fall 7 percent from 2024.

While companies have had strong interest in selling more EVs this year, “the question is how much additional discounting will we see from automakers to sell more EVs,” said UBS analyst Patrick Hummel.

In addition to rebates and incentives, some manufacturers will face additional costs to buy carbon credits from companies such as Tesla and Chinese competitors which are at the forefront of the electric transition to meet new EU regulations.

This month, Stellantis, Ford, Toyota, Mazda and Subaru announced plans to “bundle” carbon emissions with Tesla, allowing them to buy emissions credits, while Mercedes-Benz wants working with Geely-owned Volvo and Polestar.

Hummel estimated that these various measures, including rebates and carbon credits, would have an impact of up to €4 billion on overall industry profits to meet the targets.

While the European auto industry is calling on Brussels to consider making regulations more flexible, it also hopes governments will help restore consumer demand for EVs by restoring incentives.

New electric car registrations in Germany collapsed by 27 percent after the abrupt end of purchase subsidies at the end of 2023. France saw a 3 percent year-on-year decline and 21 percent in December alone.

Some governments have begun to worry about the targets as Britain considers ways to make it easier to meet its mandatory EV sales targets.

But where the political debates will be settled remains unclear.

In France, a popular leasing scheme for less well-off families to buy electric cars ended in February 2024, with 50,000 inquiries in two months, more than double the total expected in a year.

Last month, Paris cut subsidies for EV purchases from a maximum of €7,000 to €4,000, but with the French government still to approve the 2025 budget, further support for EVs or fines for polluting vehicles remains unclear.

Uncertainty about subsidies in Germany has affected sales of electric cars.

Gilles Le Born, Renault’s head of engineering, said the removal of incentives by the German government was “instant.” He added that carmakers first “need stability in public policy around electric cars” and “often it amounts to €1,000 or €2,000.” euro”. [in support] which can change things one way or another.”