Europe Electric Car Market Driven by Extensive Government Support

The European electric car market is witnessing rapid growth owing to the elevation in the consumer demand for shared mobility, strict government policies to lower the pollution levels, reduction in the costs of batteries, and improvements in the environmental awareness among consumers. In April 2022, 684,506 electric cars were sold in Europe, as per the ACEA. EVs accounted for about 10% of the total passenger cars registered in the European Union that year, as per the data of the ACEA.

Germany is expected to be one of the highest revenue generators in the European electric car market, attributed to its commitment to environmental sustainability, a strong industrial base, and the automotive manufacturing strengths, which give it an edge over other countries in Europe, such as Norway. In addition to this, German consumers benefit from a 10-year exemption from ownership tax on electric vehicles purchased between 2011 and 2030. All the benefits offered by the government, coupled with the industrial expertise, will strengthen the German EV supply chain logistics.

Europe Electric Car Market Report by P&S Intelligence 

The HEV category, based on propulsion type, will be potentially large in the European electric car market, owing to the regenerative braking system, smaller engines, lighter raw materials, and consequently lower energy requirements of these vehicles. The FCEV category will also observe growth owing to the fast refueling and zero tailpipe emissions of these variants, rising number of government initiatives for setting up hydrogen stations, and increasing expenditure on the R&D of the hydrogen fuel cell technology. 

The outbreak of the novel coronavirus fractured the European electric car market, like many other sectors, by disrupting supply chains and limiting the workforce. It had a deep impact on consumer behavior, as people reduced their spending on purchasing a car and on shared mobility services, while the manufacturing facilities were paralyzed in the first half of 2020 due to the lockdown measures.  However, the automotive sector recovered soon owing to the strong government support, which benefitted the manufacturers and the consumers.

Therefore, a strong industrial base, coupled with the extensive government support, will burgeon the adoption of the electric cars in the continent.

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Electric Car Witnessing Robust Growth in Asian Region

The Asia-Pacific electric car market is dominated by China with Japan being a distant second. This is followed by South Korea and India. The overall share of electric cars in the total car sales in Asia-Pacific region is negligible. Small cars account for a significant share of electric cars market in Asia-Pacific due to low prices of these cars and cost sensitive buying behaviour of customers in this region. The electric car market in Asia-Pacific is expected to show a significant growth over the next decade driven by government support, rising income levels and increasing environmental awareness. Current high price of electric car, underdeveloped infrastructure and uncertain political environment are some of the challenges for this market.

Rising environmental awareness and government support are expected to drive the Asia-Pacific electric cars market. Economies in this region are reducing their dependence on costly fossil fuel by promoting electric cars. For instance, India plans to replace all cars by electric ones by 2030. China is offering considerable subsidy on electric cars depending upon the battery size. Rising environmental awareness among people is also benefiting the sales of these cars in Asia-Pacific.

Rising income levels and increasing urbanisation in the emerging economies in Asia-Pacific is a strong growth driver for the electric car market. In emerging economies such as India and China, the car penetration is still less compared to the developed countries. Rising income levels and aspirations to own a car would open opportunities for electric car companies in these countries. The electric car market growth in Asia-Pacific would be faster than North America and Europe, as companies would not have to wait for the conventional cars to be replaced by the electric ones. Due to current low penetration of cars in Asia-Pacific, many first-time owners of a car would opt for an electric car.

A typical car customer in major economies, such as India and China, is highly cost sensitive. Even though the running cost of an electric car is low (6kms per 1KWh), it is the high battery cost, which increases the upfront or showroom price of electric car, making owning expensive for an average customer. High upfront cost of an electric cars could slow down its sales in the region. However, declining prices of lithium-ion batteries over the last few years is a positive sign for the Asia-Pacific electric car market.

A considerable number of players are operating in the Asia-Pacific electric car market. These players can be broadly divided into two categories. The local Chinese players (such as BYD, BAIC and Dongfen) whose sales are mostly restricted to China and the global international companies (such as Nissan and General Motors) which are present in the many countries in the region including China. Due to the dominance of China in total sales, the local Chinese manufacturers together constitute a considerable share in the global sales.

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Need to Lower Carbon Dioxide Emissions to Augment the Electric Car Market Growth

The compliance to the stringent emission norms across the globe, combined with government incentives and subsidies for electric vehicle (EV) adoption, is positively influencing the electric car market. In 2017, 927,485 electric cars were sold, and the market is expected to progress at a 33.6% CAGR during the forecast period (2017–2023). An EV is an automobile that uses electric energy as fuel, which is stored in battery packs which are rechargeable.

A shift toward battery electric vehicles (BEV) from plug-in hybrid battery electric vehicles (PHEV) is being observed in the electric car market. BEVs, being eco-friendlier, are compelling the governments to offer subsidies and incentives for their adoption. In the U.S., car companies are motivated to sell more BEVs than PHEVs, owing to the fact that the former vehicle type gets them more Zero Emission Vehicle (ZEV) credits. Likewise, in France, the provision for more tax exemptions exists for electric cars emitting up to 20 g CO₂/km than those emitting 21 to 60 g CO₂/km, where the former and latter figures usually correspond to BEVs and PHEVs, respectively.

To increase their electric car market presence, automakers are seeking expansion by acquiring small local players and engaging in joint ventures (JV). Foreign companies are rapidly entering the Chinese market through collaborations with regional players. For instance, Volkswagen Group is collaborating with SAIC Motor to develop electric cars in China. By 2022, the Renault–Nissan–Mitsubishi Alliance aims to launch 12 new electric vehicle models. Similarly, BMW Group, in 2018, entered into a JV with Great Wall Motor Company Limited in China for the production of electric cars under the Mini brand.

Further, stringent emission norms are driving the electric car market forward. With increasing global concerns about the rising greenhouse gas levels in the environment, and automobile fuel being one of the major contributors to that, many countries are imposing strict regulations to limit these harmful emissions. For instance, in keeping with the Europe 2020 strategy, the European Union aims to cut down the CO₂ emissions by 20.0% by 2020 from the levels reported in 1990.

Another contributing factor in the growth of the market is the reducing prices of battery packs, as they hold a significant share in the pricing of an EV. To help BEVs compete with conventional cars in terms of pricing, the cost of battery packs should be lower than $120/kWh. During the 2010–2016 period, their cost dropped to $227/kWh. The market would benefit by the decreasing costs of battery packs, which combined with improved battery range and capacity, would further drive the market growth.

Based on technology, the electric car market classifications are PHEVs and BEV. BEV’s dominance in China and higher subsidies provided for their adoption compared to PHEVs contributed to their larger volume share in the market during the historical period (2013–2017). Owing to their better eco-friendliness as compared to PHEVs, they are projected to be the faster growing category in the forecast period as well, leading the market in 2023.

On the basis of segment, the categories are premium, medium, low, and economy. In 2017, the economy category held the largest volume share in the electric car market, with the low category coming in second. The sales of the cars under these categories were observed to be higher than the others during the historical period owing to their affordability and popularity in key markets such as China. The fact that China is the largest market for EVS further substantiates this finding.

Hence, the market is slated to advance owing to the surging concerns about air pollution.

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Hybrid Electric Car Puts Tech On Track

The strict government regulations on the emission of carbon dioxide (CO₂) from vehicles and the fall in battery prices are some of the reasons behind the growth of the hybrid electric car market. In 2017, the market generated a revenue of $57,164.8 million, and it is expected to attain a size of $1,38,023.3 million by 2023, progressing at a 16.7% CAGR during the forecast period (2018–2023). Hybrid electric cars use an internal combustion engine (ICE) with a battery, which is charged by converting the kinetic energy produced during braking into electric energy.

On the basis of hybridization, the hybrid electric car market is bifurcated into full and mild. Of these, in 2017 the full bifurcation held a larger revenue share of more than 85.0% in the market, and it is predicted to dominate it during the 2018–2023 period as well. However, mild hybrid cars are predicted to grow faster in the market during the forecast period, especially in developing nations, such as India and China. This growth can be due to the low cost of mild hybrid cars compared to full hybrid variants.

Further the mechanical integration of components and powertrains and properties, such as electric turbocharger, power steering, and air conditioning, at a low cost is easier in mild hybrid cars. A full hybrid car is nearly $2,500–$3,500 costlier than a similar conventional car. Even though a full hybrid car is more fuel-efficient than the mild one, the latter provides a better cost-to-benefit ratio due to its comparatively low upfront cost. Furthermore, the cost-efficient aspect for customers and the time-saving aspect for producers are boosting the growth of the hybrid electric car market.

Furthermore, several initiatives are being taken by the European Commission to ensure a cleaner and greener environment. For instance, it targets to lower CO₂ emissions by 20.0% by 2020 from the levels registered in 2008. Similarly, various nations have proposed motor vehicle carbon emission or fuel efficiency policies. The increasing concern in the light of CO₂ emissions around the globe is wiping out conventional vehicles. These strict emission policies would ultimately raise the price of traditional cars and impel customers and automobile organizations to adopt low-emission hybrid electric vehicles (HEVs).

Geographically, the Asia-Pacific region led the hybrid electric car market in the historical period (2013–2017), wherein it made a revenue contribution of more than 57.0%, and it is expected to maintain its lead in the market till 2021. This is attributed to the rising government incentives, increasing environmental awareness among customers, and strict emission policies in various countries, including Japan, which is a hub for giant hybrid electric vehicle makers, such as Honda, Toyota, Nissan, and Mitsubishi.

Various nations are offering support, such as high-occupancy vehicle lane and emission inspection exemption, to owners of hybrid cars. Further, the electric car battery cost reduced from $1000/kWh to $227/kWh during 2010–2016. During the forecast period, the prices of lithium ion (Li-ion) batteries are predicted to witness a greater fall compared to nickel-metal hydride (NiMH) batteries. As per industry experts, the cost of Li-ion batteries is expected to drop below $120/kWh by 2020, which, in turn, would boost the hybrid electric car market as the price of battery often decides the electric car cost.

Thus, stringent government regulations and a drop in the battery prices are predicted to augment the market growth during 2018–2023.

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