Author: Zhu Yulong

From the current perspective, Europe and America are facing problems in macroeconomic terms. Under the condition of high energy prices, the operation and economic activities of enterprises are greatly affected. This is also reflected in the sales data of new cars, especially in the markets of big cars (UK, France, Germany, and Italy).

• In the UK, the number of new car registrations in June was 140,900, a year-on-year decrease of 24%, the lowest sales record since 1996. The number of new car registrations in the UK in the first half of the year was approximately 802,000, a overall decrease of about 12%, the second lowest half-year sales record since 1992.

• In Germany, 224,558 passenger cars were newly registered in June, a year-on-year decrease of 18.1%. The sales in the first half of 2022 were 1,237,975, a year-on-year decrease of 11.0%.

• In Italy, the number of passenger cars registered in June decreased by 15.0% year-on-year to 127,209. The sales in the first half of 2022 decreased by 22.7% year-on-year to 684,228.

• In France, the number of new car registrations in June decreased by 14% year-on-year to 171,089. The sales in the first half of France were 771,979, a year-on-year decrease of 17.9%.

• In Spain, the number of passenger cars registered in June decreased by 7.8% year-on-year to 89,252. The sales in the first half of 2022 decreased by 10.7% year-on-year to 407,757.

These big car markets are all in trouble, which means that as various factors converge, under the high energy prices and global monetary policies, the European economy has stalled, and one of the manifestations is the continuous decline in the demand for cars, with the total demand each month declining by -10% to -20% year-on-year. This is also the case for the first half of the year, excluding the one-time effect in April.

Therefore, we have a basic judgment that the overall automobile industry in Europe has entered a recession period, with total demand declining. This can be reflected in the demand for car markets in Germany, France, Italy, the UK, and Spain.

Based on this basic judgment, let us take a look at the situation of new energy vehicles in various countries.

The situation in various countriesThe good news is that the new energy vehicle (NEV) market in Europe has maintained a high penetration rate under high oil prices, but the total volume has not further increased, remaining in a plateau.

Battery Electric Vehicle (BEV)

However, looking at the BEV segment, the overall growth rate is still good, and the trend is correct. The only exception is Germany, where the growth rate has slowed down after a relatively high penetration rate. The share of new energy vehicles in Germany is similar to that of China, with pure electric vehicles accounting for 14.4% and plug-in hybrids for 11.7%. On a month-on-month basis, the BEV segment has increased, but not as rapidly as in 2021.

Note: I understand that this is related to the fact that there are not many vehicles shipped from Shanghai to Europe, and Tesla’s German factory has not yet ramped up production on a large scale.

Plug-in hybrid

Due to a high base number last year, the overall year-on-year growth of plug-in hybrids this year is relatively poor, especially in June. Traditional automakers may not yet be aware of the urgency of demand for plug-in hybrids.

What should we pay attention to?

I don’t think every country can smoothly achieve a penetration rate of 25%-30% for NEVs or even to 50% or 90%. From a global perspective:

• The prices of electric vehicles are rising, and the cost of batteries is following the rise in raw material prices. While ZF is working to offset the price difference in China, the portion of new energy vehicle subsidies policy that originally required more money in Europe is beginning to be withdrawn.

• Let’s think about it carefully. In fact, a 25% penetration rate equals 1/4 of the population receiving ZF funding, and the entire budget is burning.

We should return to the basics: companies in the market ultimately need to return to the fundamentals of cost control. Now that the cost of electric vehicles has returned to a basic position, whether they can reduce costs and maintain this lower price or not will determine whether the penetration rate can further break through on a global scale.

In some ways, Europe has also reached the ceiling of penetration rate slightly earlier than us. What we rely on to solve similar problems is an important topic for discussion.

This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.