European car manufacturers prepared for a difficult 2025 despite the “firework” of the start

Europe is set to start sales of electric cars this year as automakers bring more than 160 models to market, but executives warn that profits could fall further due to regulatory and discounting costs.

Growth in EV Sales across key European markets ground to a halt last year as governments cut subsidies and companies put new EV models on hold until 2025 in anticipation of tougher regulations. production of continental gases.

Matthias Schmidt, an independent automotive analyst, has predicted that 2025 EV sales in Western Europe, including the UK, will jump 40 percent to 2.7mn vehicles, as automakers rush to meet CO₂ targets. . He predicted the share of battery-powered vehicles from 15-17 percent, to 22 percent of this year’s market. “We expect the market to rebound in 2025 due to EU regulation,” he said.

But the return of EV sales growth will come with higher costs to meet stricter emissions regulations and more discounts as consumers seek cheaper vehicles. With underlying demand still weak, executives said the overall outlook for the European auto industry remains challenging amid growing Chinese competition and growing protectionism in the United States.

“In terms of production between EVs and hybrids, we are ready,” said Fabrice Cambolive, who heads the Renault brand, where 13 percent of its sales are electric. “In terms of demand, we see signs that are not changing very much. The level of reluctance is very high among our customers.”

The European association of the automotive industry Acea has estimated that the fines, the cost of the carbon credit or the sale of EVs at a loss could cost car manufacturers €16bn if the 2025 penalties are not delayed. Its preliminary data showed that new EV registrations in Europe fell by almost 6 percent last year.

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

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

With a record number of product launches in the company’s history from 2025, Ola Källenius, CEO of Mercedes-Benz, said the company will “produce fire products, most of which are will be fully electric”.

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

From this year, the EU will require car manufacturers to reduce carbon emissions by increasing the proportion of electric vehicles sold. Automakers and analysts have been watching the UK closely, which last year launched its EV quota policy requiring 80 percent of vehicle sales to be zero-emission vehicles by the end of the year. ten.

The UK’s performance in the first year of EV regulations gives an indication of how regulatory pressure can affect sales and profits.

Registrations of new EVs rose 21 per cent to a record 382,000 last year as the UK overtook Germany for the first time as the biggest market for battery-powered vehicles.

However, discounts on EVs are attractive reluctant buyers Abandoning petrol cars is costing car manufacturers billions of pounds. Despite the price reduction, businesses have made up the majority of EV sales with 1 in 10 independent consumers choosing an electric model.

Mike Hawes, chief executive of the Association of Motor Manufacturers and Traders UK, warned Mike Hawes, “Funding available to stimulate demand will come under severe pressure as manufacturers have limited resources. very much.”

Analysts have predicted weak profits in Europe will lower global performance for carmakers. UBS has estimated that earnings before interest and tax for European car groups will fall by 7 percent compared to 2024.

Although companies had strong interest in selling more EVs this year, “the question is how many discounts will we see from automakers to sell more EVs”, said UBS analyst Patrick Hummel.

On top of rebates and advertising, other manufacturers will face additional costs for buying carbon credits from the likes of Tesla and Chinese opponents which precedes the electricity transition, in order to meet the new EU regulations.

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

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

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

Registrations of new electric cars in Germany fell by 27 percent last year after the purchase subsidy was abruptly withdrawn at the end of 2023. France saw a 3 percent drop in the year and year and a 21 percent fall in December alone.

Other governments have started to get concerned about their targets and Britain is considering ways to make it easier to meet its mandatory EV sales targets. France has suggested that carmakers should not face the huge fines that could be imposed if they fail to meet EU emissions rules.

But it is still unclear where the political debate will end.

In France, a popular plan to hire low-income households to buy electric cars ended in February 2024, after 50,000 applications in two months more than doubled the number expected in a year.

Paris lowered EV purchase subsidies from €7,000 to €4,000 last month but as the French government has yet to pass a 2025 budget, additional support for EVs or fines for electric vehicles pollutants are still unclear.

In Germany, uncertainty about subsidies has affected sales of electric cars.

Gilles Le Borgne, Renault’s head of engineering, said the removal of the German government’s incentives was “immediate”. He added that above all, car manufacturers “need stability of public policy regarding electric vehicles” and “usually it is €1,000 or €2,000 (in support) that can change things in one direction” .