Electric cars, a market in crisis

A market panting and dominated by a climate of expectation: this is the snapshot of the electric car sector, grappling with a complicated transition. According to data from the British consultancy firm Rho Motion, global sales of fully electric vehicles (BEV) and plug-in vehicles (Pheb) increased by 31% in 2023 to 14.2 million, with a clear slowdown compared to the growth of 60% achieved in 2022 and over 100% in 2021. For this year Rho Motion expects global growth in electric vehicle sales of between 25% and 30%, therefore a further slowdown, while the Analyst firm Canalys expects the global electric vehicle market to expand “only” 27.1% in 2024, reaching 17.5 million units.

The German brake

According to research firm JD Power, European sales of electric vehicles increased in 2023 by a paltry 17% compared to 2022, due to declining registrations in Germany, Europe's largest market for battery-powered cars, where a number of of significant cuts in subsidies has caused deliveries to plummet. During 2023, 524,219 were registered in Germany, an 11.4% growth in BEV cars and a 51.5% decline in PhEV cars. Excluding Germany, the increase in electric vehicle sales in Europe was 32%. Registrations in China grew by 36% while in the United States and Canada they jumped by 46%. As regards only pure electric cars, the BEVs, sales increased last year by 50% in the United States and in Canada and grew by 27% and 15% in Europe and China respectively.

Talking about a crisis, with these rates of development, is exaggerated. “The pace is slowing, but that's what you expect in growth markets like this,” Rho Motion data chief Charles Lester told Reuters. “You can't double it every year.” But there are not only physiological reasons behind this slowdown. The reality is that after having saturated the demand of motorists who are more oriented towards technological innovations and are attentive to the environment, car manufacturers are not offering electric cars convenient enough for the middle class, who do not see particular advantages in switching to the new technology in less time. long charging times, high prices and energy that is no longer convenient. Potential customers are at least waiting for more attractive products to hit the market.

The economical product is missing

A situation that particularly concerns Europe. Analysts from the non-governmental organization Transport and Environment point the finger at the inability (or lack of will) on the part of European companies to offer economical cars: “The disproportionate attention of car manufacturers towards larger and more premium models has led at a high price of electric cars in Europe. While the average price of BEVs has fallen in China by more than 50% since 2015 thanks, in part, to an increased focus on affordable mass-market electric vehicles and supply chain integration, the average European price of BEVs Bev increased by 18 thousand euros”. Transport and Environment points out that since 2018, 40 electric models in the A and B segments (i.e. smaller) have been launched in Europe compared to 66 in the larger segments, in particular large and expensive SUVs. So while in China there are 75 models of electric cars for less than 20 thousand euros, in Europe there is only one. The average price in Europe remains high even in the compact segments: 34 thousand euros for the A segment, 37,200 for the B and 48,200 for the compact C segment. With these prices, electric cars are not competitive in terms of costs compared to electric cars. gas. Added to this problem are fiscal policies in the EU that do not favor the electrification of company fleets.

It must also be considered that the technological development of batteries (increasingly capacious and quick to recharge) makes electric cars age very quickly: another factor, the potential loss of value, which keeps consumers and rental companies away, also burned by price cuts on new Teslas.

Therefore, if the lack of cheap cars is holding back sales growth (and without incentives, as the German case shows, the boom fades away), the risk for European industry is that Chinese manufacturers will fill this void . In the coming months, European manufacturers are expected to launch some economical models, such as the Citroen e-C3, the Dacia Spring and the Renault 5, with prices of 20-25 thousand euros. But in the meantime the Chinese are starting to produce in Europe: Byd will do it in Hungary and perhaps some other manufacturer will give in to the calls of the Italian government and come to make electric cars here. And if the Chinese market starts to show signs of tiredness, Europe will be invaded.

Negative Wall Street

The climate change regarding electric cars also affects the stock market. Tesla, the world's largest producer of purely electric cars (if we also consider plug-ins, the number one is the Chinese Byd) is suffering a collapse on the stock market: as underlined on Thursday 14 March Gabriel Debach, Italian market analyst at eToro, “Tesla has continued its recent downward trend, losing 4.5% ($25 billion market cap) after a Wells Fargo analyst downgraded the stock to Sell from Hold. The analyst also cut his price target from $200 to $125, about 27% below current levels.”

Wells Fargo analyst Colin Langan wrote that Tesla is a “no-growth” growth company. Langan expects Tesla's growth to remain flat this year and then decline in 2025 as competition increases and further U.S. home price cuts are inevitable. Swiss bank UBS also downgraded its forecast for Tesla. Analysts said concerns are growing as demand for electric vehicles slows and Chinese rivals take an ever-increasing share of the global market.

Debach added last Thursday that “the pressures weighing on Tesla are having repercussions on the entire electric vehicle sector. Among the stocks listed on Wall Street in this sector, there has been an average correction of approximately 36.5% since the beginning of the year. This negative trend risks worsening, with Fisker shares falling by more than 44% following rumors of possible bankruptcy.”

In short, we are faced with a market that is starting to move from the boom phase to a consolidation phase, with more reasonable market share prospects. And with possible victims of excessive optimism on the horizon.