European Market: Towards 100% cut in CO2 emissions from new cars by 2035
H1 2022 sales fall 13.7% to 5.6 million units, EV share of 11.6%, battery production enhanced
- EU aims a 100% cut in CO2 emissions from new vehicles by 2035, to review targets in 2026
- National governments’ purchase incentives for electrified vehicles, PHV subsidies removed in some countries
- National governments and automakers building EV battery production facilities
- EV sales increase by 32% y/y to 650,000 units in H1 2022
- Passenger car sales fall 13.7% y/y in H1 2022 due to supply chain disruptions
- Passenger car production declines 13.6% in H1 2022 due to lack of semiconductors and wire harnesses
- LMC Automotive sales forecast: Western European light vehicle sales expected to be 15.9 million units in 2025
In the European market, the automotive industry is facing various challenges including tightening environmental regulations, semiconductor supply shortages, as well as supply chain disruptions and high raw materials and energy costs due to the Russian invasion of Ukraine and the COVID-19 pandemic.
In June 2022, the Ministerial Council of the European Union (EU) agreed to key elements of the climate package “Fit for 55” proposed by the European Commission. Regarding CO2 emissions from passenger vehicles, the Council agreed to a target of a 55% reduction of emissions by 2030 compared to 2021 and a target of a 100% reduction by 2035. The Council confirmed that the Commission will review the targets in 2026, considering technological developments. The European Automobile Manufacturers’ Association (ACEA) claims that it is premature to fix a target for 2035 today and that the number of public charging points set by the Alternative Fuel Infrastructure Regulation proposal is not sufficient to achieve the emissions reduction targets.
To increase the use of electrified vehicles, European governments have implemented their respective purchase incentives. However, recently, some countries including Germany removed purchase incentives for plug-in hybrid vehicles (PHVs). The UK government terminated its purchase incentives for electric vehicles (EVs) and PHVs in June 2022 and will earmark funds for enhancing public charging infrastructure in the future. At the same time, automakers are accelerating their electrification plans.
National governments and municipalities are building production facilities for batteries, the key components of the electrified vehicles, by subsidizing battery manufacturers. Automakers are promoting in-house development and production of batteries and enhancing partnerships with battery manufacturers to secure the needed volume of batteries.
Sales of electrified vehicles (EVs, PHVs and HVs) in Europe for the first half of 2022 consisted of EVs increasing by 31.6% year-over-year (y/y) to 647,000 units, PHVs declining by 12.0% y/y to 473,000 units, and HVs (hybrid vehicles) growing by 2.2% to 1,324,000 units. The share in total vehicle sales was 11.6% for EVs, 8.4% for PHVs and 23.6% for HVs. The EV share expanded by 4 percentage points compared to 2021. Automakers are launching various EV and PHV models in 2022 to achieve the CO2 emissions targets.
Passenger car sales in 30 European countries decreased by 1.5% y/y to 11.77 million units in 2021 and dropped again by 13.7% y/y to 5.6 million units for the first half of 2022. Sales continued to fall as vehicle production decreased due to semiconductor shortages and supply chain disruptions. While semiconductor supply is expected to improve in the second half of 2022, the impact of the Russian invasion of Ukraine and the COVID-19 pandemic on vehicle sales will be unclear.
Passenger car production in 17 European countries declined by 4.9% y/y to 11.19 million units and fell by 13.6% y/y to 5.47 million units for the first half of 2022. Production was reduced as wire harness supply stopped from Ukraine due to the Russian invasion and semiconductor supply shortages continued. Although the supply chain is anticipated to recover in the second half of 2022, there will be concerns for the influence of the war in Ukraine and unstable energy supply from Russia.
|Sales of electrified vehicles (Jan-Jun 2022)
(Source: Created by MarkLines based on ACEA's data.)
|Mercedes-Benz EQS SUV, all-new electric full-size SUV
(Source: Mercedes-Benz Group)
Electric Vehicle (EV/PHV/FCV) Sales Monthly Report (July 2022) (Aug. 2022)
Vienna Motor Symposium 2022 (1) Transformation towards carbon neutral mobility (Jun. 2022)
Impact of the Russian-Ukraine War on the Automotive Industry in Europe (May. 2022)
Decarbonization - Global agreement at COP26 and its deployment to regions/OEMs (Jan. 2022)
European Market: Banning ICE vehicle sales in 2035 to be climate neutral by 2050 (Aug. 2021)
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