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Electric car now on standby: industry faces storm

An epochal crisis hits the industry: unsold battery cars, CO₂ regulations threatening to put European production out of business, while half-known Chinese brands attempt to invade with thermal and hybrid models

26 November 2024

Le vendite di e-car che non decollano, ma le Case automobilistiche stanno moltiplicando i lanci di nuovi modelli in base ai piani stabiliti

4' min read

Failing electric cars, factories closing down (even the taboo German ones), EU fines for exceeding CO2 limits in 2025 and the Chinese wanting to sweep through Europe. And a perfect storm is brewing over the car industry. Perhaps the most intense and dangerous one, capable of disrupting the geography of the industry far more than the epoch-making crisis of the past few years generated by the triple combination of pandemic, war and chip shortage. Now, the car industry, which had set off in the direction of the electric car revolution with a flurry of announcements about improbable all-in moves towards battery-powered cars to keep stock market analysts happy (the same ones who swallow the hoaxes about all-autonomous driving), is coming up against the harsh reality: lithium-ion cars, imposed in practice by the EU, are not convincing customers. And the customer is sovereign: if he is not convinced, he does not buy. The result is there for all to see: sales are plummeting (Jato data indicate double-digit declines to over 30%), models that don't take off in a hypertrophy of offerings that are merely German and incapable of competing effectively with Tesla, which in the end is the number one choice, without ifs and buts, if you want a battery-powered car.

The electric car therefore does not take off, is on standby on the runway, and despite the confirmation of EU targets to sell only zero-emission vehicles from 2035, September saw yet another confirmation with only 14% in Europe and 4% in Italy. "The reasons,' explains Dario Duse, Head of the Emea Automotive team and Country Leader Italy of AlixPartners, 'are many: perceived autonomy, high recharging costs, especially in countries like Italy, inadequate recharging infrastructure, uncertainty over residual values, and increasingly high purchase prices, which penalise sales of non-electric vehicles as well. We are really still far from a mass diffusion of electric vehicles'.

One wonders once again how it has been possible to get to this point, a situation where Teutonic certainties are wavering and one wonders which group (Stellantis or Volkswagen) will end up like Nokia, which more than 15 years ago could not withstand the shock wave of the touch revolution. And faced with the Waterloo of volumes and profit warnings, the automotive world is also questioning the ability of many managers who have decided on unsalvageable line-ups, absurd models with no hope of success (the little case of the Abarth 500e is emblematic, along with that of the Audi Q8 e-tron whose derisory sales led to the closure of the Brussels plant). But there is above all the fault of politics. A few days ago, Carlos Tavares polemised at a round table, where he announced the Stla Frame platform, saying that one should ask why regulations have been decided against the needs of consumers.

In short, the electric car is now on hold with manufacturers competing to revise their plans on the all-in, facing the Chinese challenge and the nightmare of fines for the 2025 standards with the unattainable 94 gram CO2/km limit, a threshold that means only one thing: manufacturers would have to produce no less than 20% of electric cars (perhaps even close to 30% in some cases). Cars which, under the current situation, would remain unsold and catch rain and hail on the forecourts. What does this mean? Simple, manufacturers will rather stop producing thermals and hybrids in order not to pay fines or buy CO2 credits. And the estimates, also indicated by Luca de Meo, CEO of Renault and president of Acea, indicate that there are about 2.8 million cars at risk that will not be produced, corresponding to the output of a dozen European factories. And Acea has called for action to revise the 2025 standards set well before covid with other predictions on the success of the electric car.

"As of 2025," says Duse, "the further step of reducing the CO2 emitted by vehicles sold will come into force (different targets for each OEM, -15% vs. 2021) and the penalty will be 95 euros for each additional average gram. Amounts that could wipe out the operating profit of an average European manufacturer selling around 3 million vehicles. In a stagnant market where production volumes are under stress, and market shares have to be strenuously defended against the onslaught of new manufacturers (Chinese first and foremost), reducing penalties may mean having to forcibly produce fewer combustion engine vehicles. All this leads to a further ageing of the car fleet, which in Italy is now approaching 13 years old, clearly producing results opposite to those of decarbonisation'.

Last but not least, there is the Chinese issue. It is true that players such as Byd have come close to overtaking Ford (in a possibly irretrievable decline) and other biggies such as Chery are climbing the rankings, thanks to sales at home. But in Europe the situation is different: brands still have value and it is inevitable that not all the fancy brands that the Chinese churn out at a relentless pace will survive. There will be species selection: or a buying campaign of historic European fashion houses. Everything is for sale. In the meantime, the Chinese are entering Europe with hybrids and thermals, with quality products but still little appeal. And the German premium now has to understand that it cannot compete by cutting costs and making cheap cars with creaky interiors, just as the Chinese must build cars with at least acceptable handling. In short, the recovery of competitiveness of European industry is at stake and the guidelines are all in the ledger drawn up by Mario Draghi two months ago.