European Market: Decreasing diesel vehicle sales, and the shift to EVs

Strengthened environmental regulations, the introduction of WLTP, and Brexit

2018/12/17

Summary

Introduction of WLTP

Sales of new cars in Europe were affected by the WLTP (*Note), a new fuel consumption and emissions standard introduced in September 2018. Sales until August increased due to rush demand prior to implementation of the WLTP, but have since dropped due to concerns about price increases at the time of vehicle purchase. Type certifications for new cars requiring WLTP inspection to meet conditions closer to real world driving conditions compared to NEDC, the previous testing method, resulting in increased costs for automakers to conduct inspections. Though consumers are looking forward to fuel economy information closer to reality, they are also concerned about increased prices at the time of vehicle purchase.
(*Note) WLTP: Worldwide harmonized Light vehicles Test Procedure, NEDC: New European Driving Cycle

Strengthening of CO2 emissions regulations

In the EU, the battle continues to decide on the goals to reduce CO2 emissions leading up to 2030 on new vehicles sold within the region. Current regulations mandate CO2 emissions of 130g per 1km, which will be tightened to 95g/km starting in 2021. In November 2017, the European Commission announced the new proposed targets for CO2 emissions, with 2025 emissions required to be 15% lower than 2021, and 30% lower by 2030. In October 2018, the European Parliament introduced a plan to reduce emissions by 40% by 2030, and the EU Environment Council announced goals to reduce emissions by 15% by 2025, and 35% by 2030. The three parties aim to negotiate a finalized plan by the end of 2018. These significant emissions reduction targets are tied to reducing the environmental burden and increasing the availability and competitiveness of EVs, but the automotive industry is wary of overly strict goals being determined solely by political decisions.

西欧の新車販売台数
Source: Created based on ACEA documents

Decreased sales of diesel vehicles

European automakers have responded to the EU’s strict emissions regulations by selling clean diesel vehicles with low CO2 emissions. Some reports indicate that the level of CO2 emissions in new vehicles sold in the EU increased in 2017, which was in part due to a decline in the sales of clean diesel vehicles. The sales ratio of diesel vehicles in Europe trended downwards in recent years, with Japanese automakers announcing the discontinuation and reduction of diesel vehicle sales in the European market. The three major German OEMs view clean diesel vehicles as essential to meeting the CO2 emissions regulations and will continue investing in diesel vehicles. Furthermore, if automakers withdraw from diesel vehicles, it may have a negative effect on employment in Europe. Also, a number of major German cities have implemented restrictions on the entry of diesel vehicles into those cities, and the German government announced measures for the replacement and retrofitting of older diesel vehicles in October 2018. Various automakers, including the German OEMs, are implementing replacement incentives for older diesel vehicles.

Shift to EVs

While the sale of EVs, which are expected to reduce the carbon footprint, is steadily increasing in the European market, the percentage of EVs that comprise the entire vehicle market in major countries such as Germany, France, and UK, is still at 5% or less (2017). However, there are exceptions to this situation, such as in Norway where the sales ratio of EVs is particularly high at roughly 40%, with various brands releasing BEVs and PHEVs primarily in the C- and D-Segments. The Norwegian government has set a goal to make all new vehicles by 2025 zero-emissions vehicles, and is actively promoting the introduction and popularization of EVs.

Brexit

Regarding Brexit, where the U.K. is scheduled to exit the EU in March 2019, an agreement was reached between the U.K. and the EU in November 2018. However, many citizens in the U.K. oppose the agreement proposal, and the situation remains difficult, with many voicing concern for a no-deal Brexit. While new vehicle sales in the U.K. have remained high at a level of 2.5 million vehicles annually, as Brexit approaches, consumers have become less willing to spend, and vehicle sales have continued to trend downwards. Additionally, automakers with production facilities in the U.K. are hurriedly trying to counter a no-deal Brexit which would result in increased tariffs and customs procedures.

 

Related reports:
VW Group (Part 1) Europe: Introduction of new WLTP emissions test; drop in diesel vehicle demand (Nov. 2018)
U.S. trade policy and tariffs under the Trump administration (Sep. 2018)
2021-2030 CO2 regulations in Europe, backlash against diesel, and electrification (May 2018)
OEM Electrification Strategies: Acceleration of EV and PHV Lineup Expansion (Apr. 2018)
European market: Passenger vehicle sales exceed 15 million units, diesel vehicles drop below 50% (Sep. 2017)

<LMC Automotive report>
LMC Automotive European Passenger Car Sales Update (September 2018) (Oct. 2018)

 



Passenger vehicle sales: Effects of the new fuel economy and emissions standard, WLTP

According to the European Automobile Manufacturers Association (ACEA), passenger vehicle sales in 30 European countries (EU +EFTA) saw a y/y increase of 3.3% to 15.63 million vehicles in 2017, with the first half of 2018 seeing a sales increase of 2.8% to 8.7 million vehicles.

WLTP, the new fuel economy and emissions standard, was introduced in the EU effective September 2018 (explained later). Sales in each country through the end of August were boosted by rush demand leading up to the introduction of WLTP, but a y/y downward trend in sales in the September to October timeframe continues.

Sales volumes in Germany and France have remained steady from 2017 through the first half of 2018. Though WLTP has had an impact, sales of new vehicles are expected to remain strong with automakers offering incentives to replace diesel vehicles. However, the new car markets in both countries are approaching the saturation point, and the sales of electric vehicles remain limited, despite the high degree of expectation they possess to reduce the carbon footprint.

Sales in Spain saw a y/y increase in 2017 of 7.7%, with sales in the first half of 2018 also growing significantly by 10.1%. Despite the effects of WLTP, there is still room for market growth in Spain, with additional market expansion expected going forward. Italy saw positive market growth of 7.9% in 2017, which turned negative in the first half of 2018. Consumer purchases declined due to political uncertainty leading up to the implementation of the new cabinet in June, but no recovery in new vehicle sales has been observed since the launch of the new cabinet.

The UK saw new car sales decline by 5.7% in 2017, with a further decline of 6.3% in the first half of 2018. Economic confidence and consumer spending power continues to decline leading up to Brexit (see next section), which is expected to occur in March 2019. Though the UK vehicle market size is at a sales level of 2.5 million vehicles per year, stricter environmental regulations and the WLTP have created a negative market outlook leading up to Brexit that is expected to persist for the foreseeable future.

 

Passenger vehicle sales in the 30 European nations

Country 2016
Jan - Dec
2017
Jan - Dec
Change
(%)
2017
Jan - Jun
2018
Jan - Jun
Change
(%)
Austria 329,604 353,320 +7.2 186,561 192,861 +3.4
Belgium 539,519 546,558 +1.3 322,302 331,369 +2.8
Bulgaria 26,370 31,244 +18.5 14,749 18,082 +22.6
Croatia 43,015 50,412 +17.2 32,091 38,284 +19.3
Cyprus 12,671 13,080 +3.2 7,542 7,651 +1.4
Czech Republic 259,693 271,595 +4.6 144,451 143,784 -0.5
Denmark 222,917 221,818 -0.5 123,802 120,750 -2.5
Estonia 22,429 25,020 +11.6 13,122 14,190 +8.1
Finland 119,000 118,581 -0.4 64,451 69,600 +8.0
France 2,015,177 2,110,748 +4.7 1,135,267 1,188,150 +4.7
Germany 3,351,607 3,441,262 +2.7 1,787,026 1,839,031 +2.9
Greece 78,873 88,083 +11.7 50,356 62,312 +23.7
Hungary 96,552 116,265 +20.4 54,850 70,733 +29.0
Ireland 146,649 131,355 -10.4 91,215 87,147 -4.5
Italy 1,825,892 1,970,497 +7.9 1,137,299 1,120,829 -1.4
Latvia 16,359 16,692 +2.0 8,614 9,070 +5.3
Lithuania 20,320 25,865 +27.3 12,814 15,966 +24.6
Luxembourg 50,561 52,775 +4.4 28,946 30,655 +5.9
Netherlands 381,885 417,075 +9.2 225,975 253,410 +12.1
Poland 416,123 486,352 +16.9 247,014 273,045 +10.5
Portugal 207,330 222,134 +7.1 127,186 134,506 +5.8
Romania 94,919 105,083 +10.7 45,008 60,068 +33.5
Slovakia 88,163 96,085 +9.0 48,871 51,891 +6.2
Slovenia 63,674 70,892 +11.3 39,032 41,677 +6.8
Spain 1,147,009 1,234,931 +7.7 667,494 734,649 +10.1
Sweden 372,318 379,393 +1.9 193,530 225,543 +16.5
United Kingdom 2,692,786 2,540,617 -5.7 1,401,811 1,313,994 -6.3
European Union (EU) 14,641,415 15,137,732 +3.4 8,211,379 8,449,247 +2.9
EU-15 13,481,127 13,829,147 +2.6 7,543,221 7,704,806 +2.1
EU-12 1,160,288 1,308,585 +12.8 668,158 744,441 +11.4
Iceland 18,442 21,277 +15.4 13,683 11,883 -13.2
Norway 154,603 158,650 +2.6 77,983 76,745 -1.6
Switzerland 317,318 314,028 -1.0 158,918 157,910 -0.6
EFTA 490,363 493,955 +0.7 250,584 246,538 -1.6
Total (EU + EFTA) 15,131,778 15,631,687 +3.3 8,461,963 8,695,785 +2.8
Total (EU15 + EFTA) 13,971,490 14,323,102 +2.5 7,793,805 7,951,344 +2.0

Source: Automobile Manufacturers' Association (ACEA)

 

WLTP (Worldwide Harmonized Light Vehicle Test Procedure)

All new cars registered within the EU are required to use the new WLTP (Worldwide Harmonized Light Vehicle Test Procedure) testing method implemented in September 2018 to acquire type certifications. The WLTP is gradually replacing the existing NEDC (New European Driving Cycle) test standard. WLTP was initially introduced in September 2017 for new passenger car models, but was introduced for all new car registrations starting in September 2018, including models already sold in the market.

NEDC testing was conducted according to a specific driving mode programs, but a major issue with the test standard was that expected fuel economy and actual fuel economy results differed considerably. Conversely, the new WLTP was designed to consider driving data of existing models, uses more realistic driving cycles, and conditions closer to real world driving (speed, distance, testing environment temperature, etc.) to more accurately measure fuel economy and emission levels. Additionally, NEDC was only able to verify a model itself based on basic engine and transmission configurations, but WLTP allows for inspections that consider variation in types of tires, panoramic roofs, and other equipment when measuring fuel economy and emissions levels.

In countries where vehicle tax rates are determined based on CO2 emissions, the introduction of WLTP is expected increase government revenues related to vehicle taxes. While consumers can expect fuel economy ratings to more accurately reflect real world driving conditions, consumers are concerned about increased vehicle prices.

With the increase in the number of items to be inspected, automakers will incur increased man-hours and costs. Some models have been unable to receive market certification under the WLTP system, leading to concerns that vehicle sales will be negatively impacted. Furthermore, some reports indicate that delivery schedules may be negatively affected as a result of production adjustments, and the production of some models, such as high-performance vehicles, may be suspended.

Related report: VW Group (Part 1) Europe: Introduction of new WLTP emissions test; drop in diesel vehicle demand (Nov. 2018)



Brexit: The automotive industry scurries to respond to a no-deal Brexit

The U.K. and the EU are in discussions regarding Brexit, where the U.K. is scheduled to withdraw from the EU on March 29, 2019. At the end of November 2018, the U.K. government and the EU agreed to the Draft Withdrawal Agreement, which outlines the conditions for the U.K. to withdraw from the EU, as well as the Outline Political Declaration, which gives a broad overview on the relationship between the U.K. and the EU after the withdrawal. The content of the Draft Withdrawal Agreement prioritized avoiding a no-deal Brexit, which would run the risk of creating tariffs and customs procedures, and excluded controversial issues such as those related to immigration. The EU is emphasizing this as the only feasible plan.

While the agreement proposal needs to be approved by the British Parliament, there is heavy opposition, primarily among Brexit hardliners, and the proposal has been unable to gain support for the required majority of 320 votes (as of the end of November). The EU has shown a non-responsive attitude with regards to renegotiation and has restrained activities aimed at rejecting the agreement proposal. The Brexit situation remains difficult, as there still remains the risk of a chaotic withdrawal, which would lead to confusion in corporate activities and the lives of the country’s citizens.

 

Brexit Timetable

Late November 2018 Provisional EU Summit: Announcement of agreement proposals for the Draft Withdrawal Agreement and the Outline Political Declaration (November 25)
Mid-December 2018 Regular EU Summit
British Parliament: Voting on the withdrawal draft agreement (December 11)
If rejected, the U.K. government must present an alternative within 21 days: Re-negotiations with the EU, a second national referendum, and postponement of the timing of the withdrawal
Late December 2018 The EU’s final deadline for agreement
January 2019 British Parliament: Withdrawal-related legislation passed
Deadline to determine a deal or no-deal Brexit (January 21)
March 29, 2019 The U.K. withdraws from the EU
If an agreement is found and a transition period decided upon: After withdrawing from the EU, the U.K. will remain as part of the EU’s unified market as well as in the customs union until the end of 2020 to avoid major disruptions
End of 2020 End of transition period
If the transition period is extended: a single extension will be permitted for a period of no longer than two years.

Source: Created based on press releases and media reports (as of the end of November 2018)

 

Impact to the Auto Industry

In the event of a no-deal Brexit, there is the threat of cumbersome customs clearance procedures between the EU and the UK, which could result in shortages in the supply of parts for automakers. As a precaution, automakers with production facilities in the U.K. are currently preparing for the possibility of a no-deal Brexit.

BMW manufactures MINI model vehicles in the U.K. and the Netherlands, but plans to suspend production at its Oxford plant in the U.K. for roughly one month after the country withdraws from the EU in April 2019. The company usually suspends production in the summer but is pulling this schedule ahead with plans to use it as a maintenance period. The Oxford plant will be used as a production base for the domestic market, while the Netherlands plant is scheduled to serve as an export hub for Europe and FTA-connected regions. Production rates at both plants are expected to change.

Toyota and Nissan have both received certification from the U.K. to sell automobiles in the EU, and will be acquiring certification from the entire EU region as well. Type certifications acquired in the UK are currently valid across the entire EU, but are expected to become invalid in the EU following the UK’s withdrawal. In the event of a no-deal Brexit, tariffs, customs clearance procedures, and supply chain disruptions are expected to occur. For this reason, Toyota is even considering temporarily suspending operations at its plants in the U.K.

Also, in October 2018, Nissan decided to postpone 2019 and 2020 wage revision negotiations for employees working at its Sunderland plant until the beginning of next year. The automaker is expecting cost increases related to customs duties and changes to its production volumes in the event of a no-deal Brexit, with plans to conduct future wage revision negotiations while closely monitoring the expected the impact to production and sales.

Component suppliers source raw materials from France and other EU countries outside the U.K., so they are concerned about the disruption to the supply chain that may result if customs procedures become complex in the event of a no-deal Brexit. Likewise, some OEMs have requested parts suppliers to hold more stock in inventory, and are anxious concerning the prospect of having to meet demand using a supply chain that was originally established for just-in-time delivery and low inventory in stock.

Acura CDX Acura RDX
MINI’s production facility is located at BMW’s Oxford plant in the U.K. and at VDL Nedcar’s Born plant in the Netherlands (Source: BMW Group Press Release) Nissan’s Sunderland plant primarily assembles major models such as the Leaf and ships mainly to the European market (Source: Nissan Europe Newsroom)

 

Difficulty over Brexit talks

The U.K. hopes to continue trading with the EU after Brexit as it currently does today, and believes that the fewer tariffs and customs procedures, the better. In such an event, however, the EU believes that the U.K. will have to follow the EU’s rules in other areas as well, and not just regarding the trade of goods.

The biggest points of contention regarding the Brexit talks revolve around border control in Northern Ireland and the establishment of a free trade zone relating to the trade of goods between the U.K. and the EU. In November 2018, the May administration approved the proposal to withdraw from the EU at a cabinet meeting, and safety measures were incorporated to allow the U.K. to temporarily remain in the EU Customs Union until the border dispute with Ireland is resolved. At an extraordinary EU summit held at the end of November, an agreement was proposed to incorporate a transitional period where the U.K. remains in the EU’s unified market and Customs Union even after its withdrawal from the EU.

The British commercial industry welcomed these moves to avoid high customs duties and maintain the current flow of goods. However, Brexit hardliners in the British Parliament are strongly opposing the proposed agreement that would force the U.K. to follow the EU’s rules even after Brexit. This rule, which forced the U.K. to welcome immigrants from member states, lead to a major backlash from its citizens, ultimately leading to the decision by the U.K. to exit the EU in the 2016 national referendum. Brexit hardliners argue that the U.K. should create its own trade agreement to regain independence and to suppress the influx of immigrants.

The trade of goods
The Outline Political Declaration announced in November 2018 states that the U.K. and the EU will aim to become a comprehensive free trade area, while leaving the details ambiguous.
Although the EU aims to establish a relationship with the U.K. that centers on a free trade agreement (FTA), the U.K. side wants to establish a deeper relationship than just an FTA to realize frictionless trade. In the withdrawal proposal announced by Prime Minister May in July 2018, the U.K. government stated that while it will establish a free trade area with the EU regarding industrial products and agricultural products, it will restrict the influx of immigrants, and retain the right to freely establish FTAs with third countries. The EU believes that this proposal, which seeks to benefit only the U.K., will not function.
The Irish Border Question
In the past, the border between Northern Ireland and the Republic of Ireland was an area of sectarian conflict, but integration of the area has advanced under the EU. To avoid any political instability caused by Brexit, the U.K. and the EU have agreed to avoid reigniting strict border control measures. However, unless concrete measures are identified by the end of the transition period, the U.K. will remain in the EU Customs Union, which will secure the flow of goods similar to the current state while avoiding the return of customs duties, but opposition is increasing with concern that the U.K. will be unable to regain its independence.

Source: Created based on press releases and media reports



Strengthened environmental restrictions: Raising CO2 emissions reduction targets, and the restriction of diesel engine vehicles in urban areas

Raising the CO2 emissions reduction target

Conflict continues regarding the CO2 emissions reduction targets for new vehicles (passenger vehicles and light commercial vehicles) sold in the EU by 2030. While major reduction targets can contribute to reducing the environmental burden and the popularization and intensifying competition of EVs, the automotive industry claims that the targets will negatively impact employment in Europe.


Currently, CO2 emissions regulations in the EU is 130 g for every 1 km driven, which will be raised to 95 g/km after 2021. This will become the strictest regulations in the world (reference: Japan 105 g/km, China 117 g/km, the U.S. 121 g/km), and automakers who cannot meet the regulation standards will be fined.
In November 2017, the European Commission proposed a target to reduce CO2 emissions by 15% in 2025 rather than by 2021, followed by 30% in 2030. In response to this, on October 3, 2018 the European Parliament voted on a proposal to reduce CO2 emissions by 40% by 2030. On October 9, 2018 the EU’s Environment Council agreed to reduce CO2 emissions by 15% by 2025 and 35% by 2030 (a compromise agreed upon by 20 of the 28 member countries). Finalization of new legislation to incorporate the new targets will be discussed between the European Parliament, the European Commission, and representatives of the EU Council of Ministers, with the aim of reaching an agreement by the end of 2018.
Countries such as Germany and a number of Eastern European countries, which have significant influence in the automotive industry, are in support of the proposed new emissions reduction target of 30%. Countries that more aggressively support environmental regulation, such as the Netherlands and Denmark, claim that the reduction needs to be 40% or more.


The automotive industry has opposed excessively strict targets, and the European Automobile Manufacturers Association (ACEA) claims that the actual more achievable target by 2030 is 20%. The European Association of Automotive Suppliers (CLEPA) is demanding that no changes be made to the 30% reduction proposal. The German Association of the Automotive Industry (VDA) has also been cautious of excessively stringent targets being established based on political decisions.


According to the European Environment Agency (EEA), CO2 emissions by new vehicles sold in the EU in 2017 were 118.5 g/km for a y/y increase of 0.4 g, which is believed to be due to the decline in the sales of diesel vehicles, which have fewer CO2 emissions, and the increase in sales of SUVs, which are relatively less eco-friendly.


Related report: EU: Announced a proposal to cut CO2 emissions by 30% by 2030 from 2021 (May 2018)

 

Restriction of diesel vehicles and the promotion of replacements in Germany

In February 2018, the German Federal Court of Justice ruled in favor of city governments, giving them the authority to restrict the entry of diesel vehicles into urban areas as a corrective measure for cities with high levels of air pollution such as NOx. Given this ruling, Hamburg, the second largest city in Germany, banned the entry of diesel vehicles that do not meet the Euro 6 standards in two central areas of the city. In July, the city of Stuttgart, home to Daimler and Porsche, restricted vehicles that can only meet Euro 4 and earlier standards, with plans to ban all diesel vehicles from being allowed to be driven in central urban areas after 2019.


European automakers, in particular German automakers, have sold clean diesel vehicles with lower CO2 emissions to comply with the EU’s strict emissions regulations. Additionally, the Merkel administration has taken automotive-related employment (about 800,000 people) into consideration, setting forth measures to prolong the life of diesel vehicles.
Diesel engine vehicles that do not fall within the emissions regulations have better fuel economy than gasoline engine vehicles, helping reduce overall CO2 emissions, but release hazardous substances that lead to air pollution, such as NOx and PM, requiring filtration devices. VW’s emissions scandal revealed that its vehicles were emitting far higher levels of hazardous substances such as NOx than in actuality as a result of its fraudulent testing practices.


In October 2018, the German government announced incentives to replace and retrofit older diesel engine vehicles. Although the retrofitting of older engines reportedly leads to poorer fuel economy and drive comfort, VW has not disagreed with the retrofit measures. While stating that the details still need to be clarified, Daimler has agreed to them. BMW will be able to start the retrofits by around 2021, stating that much time is required to coordinate the initiative and entails a significant amount of technical complexity, so for the time being it is refusing to retrofit vehicles.


The three major German OEMs will continue investing in diesel vehicles, as they believe diesel vehicles are crucial to meet the CO2 emissions regulations, since they produce less CO2 emissions than gasoline engine vehicles. Furthermore, if all OEMs withdraw from diesel vehicles all at once, it may cost hundreds of thousands of people their jobs.
On the other hand, various automakers, including the German OEMs, have provided incentives for the replacement of older diesel vehicles, interpreting it as a business opportunity to promote short-term replacement demand.



Three German OEMs continue to invest in diesel, Japanese OEMs to withdraw from diesel vehicle sales

The sales ratio of diesel vehicles in Europe has been trending downward in recent years. The ratio has dropped below 50% in the 18 Western European countries (EU 15 + EFTA). And, in major nations such as Germany and the U.K., the ratio has dropped to roughly 40%, while in France and Spain, the ratio has dropped to below 50%. In the Netherlands and Norway, where the sales of gasoline and diesel engine vehicles will be banned after 2025, the ratio has decreased to roughly 20%.

In November 2018, the Spanish government announced its policy of banning the sales of gasoline and diesel engine vehicles by 2040, following the announcement of a similar policy in the U.K. and France announced in July 2017. In August 2018, the U.K. government announced its Road to Zero strategy, which aims to increase the ratio of HVs and EVs to comprise 50% or more of new vehicle sales by 2030, and nearly all passenger vehicles and compact commercial vehicles to be zero-emissions vehicles by 2050.

 

Sales ratio of diesel engine vehicles in the 18 Western European nations

Country 2015
(%)
2016
(%)
2017
(%)
2016/2017
Change (ppt)
Austria 58.3 57.3 49.7 -7.6
Belgium 59.7 52.0 46.5 -5.5
Denmark 31.0 36.0 35.0 -1.0
Finland 35.7 33.3 30.6 -2.7
France 57.2 52.1 47.3 -4.8
Germany 47.7 45.8 38.7 -7.1
Greece 63.2 55.1 44.6 -10.5
Ireland 71.0 70.0 65.2 -4.8
Italy 55.2 57.0 56.3 -0.7
Luxembourg 70.4 65.0 54.0 -11.0
Netherlands 28.9 18.9 17.5 -1.4
Portugal 68.1 65.1 61.5 -3.6
Spain 62.7 56.9 48.4 -8.5
Sweden 57.7 51.5 48.4 -3.1
United Kingdom 48.4 47.7 42.0 -5.7
EU-15 52.1 49.9 44.8 -5.1
Iceland 46.7 44.7 41.8 -2.9
Norway 40.8 30.8 23.1 -7.7
Switzerland 38.7 39.6 36.3 -3.3
EFTA 39.6 37.0 32.3 -4.7
Total (EU15 + EFTA) 51.6 49.5 44.4 -5.1

Source: Automobile Manufacturers' Association (ACEA)

 

Withdrawal and reduction of diesel vehicle sales

Japanese OEMs, who have not historically excelled in making diesel engine vehicles, plan to withdraw or reduce diesel vehicle sales in the European market, accelerating the departure from diesel and increasing the sales of HVs in Europe. In September 2018, Porsche became the first German automaker to announce its withdrawal from diesel vehicle sales.

 

OEMs moving away from diesel vehicles and pursuing electrification

Toyota Toyota announced it would not be providing diesel engine options for new passenger vehicles sold in Europe after 2018.
Honda With the new CR-V released in 2018, Honda omitted a diesel option, and will release a new HV model in early 2019 and sequentially reduce diesel vehicle sales.
Nissan Nissan will withdraw from diesel vehicle sales in Europe in the first half of 2020, as well as discontinue development activities.
Mitsubishi Mitsubishi will sequentially terminate the sales of diesel passenger vehicles such as SUVs at its retail companies in the U.K. and Germany in 2018. Diesel pickup trucks will continue to be sold.
Suzuki Suzuki plans to discontinue sales of new diesel vehicles in Europe in 2018.
Porsche Porsche formerly purchased diesel engines from Audi, a subsidiary of the VW Group, featuring them on its Cayenne and Macan SUVs. Diesel engine vehicles consist of 12% (in 2017) of Porsche’s total vehicle sales. Since February 2018, the automaker has not included diesel engine vehicles in its lineup. By 2020, Porsche will invest EUR 6 billion or more in electrification and plans to make half its total vehicle sales HVs or EVs by 2025. The OEM is scheduled to release the Taycan EV in 2019.
Volvo Cars In the spring of 2017, Volvo announced it would withdraw from the diesel vehicle market, and that all its vehicles after 2019 will be electrified.

Source: Created based on press releases and media reports

 

Acura RDX Acura CDX
Porsche is building an assembly plant for its Taycan EV on the grounds at its main plant in Zuffenhausen, Germany. (Source: VW News) Honda did not release a diesel variant of its new CR-V, and instead will sell an HV model. (Source: Honda European Media Newsroom)


EV vehicle sales ratio in EU at 5% or less, and roughly 40% in Norway, the EV superpower

電動車の販売台数
Source: Created based on ACEA documents

While the sales of EVs have steadily grown in the European market, the overall percentage when looking at the entire market has remained at 5% or less. ECV (*Note) sales (2017) in major EU countries are as follows: 54,617 units in Germany (y/y increase of 116.6%, sales ratio 3.2%), 47,298 units in the U.K. (+27.5%, 1.9%), and 36,835 units in France (+26.2%, 1.7%).
(*Note) ECV: ECV (electrically chargeable vehicle) = Battery electric vehicles (BEVs), Plug-in hybrid vehicle (PHEVs), and Hybrid electric vehicles (HEVs).


Norway has an outstandingly high EV sales ratio (explained later), with roughly 40% comprised of ECVs, and 50% when HEVs are included. BEV sales in Norway (2017) saw a y/y growth of 36.3% to 33,025 units, making Norway the country with the highest BEV sales in Europe. PHEVs saw a 62.2% increase to 25,165 units, and HEVs saw an 18.8% increase to 20,500 units.

 

Sales ratio of electric vehicles in the European nations (2017)

COUNTRY Passenger Car ECV ECV+HEV
Sales (units) Sales (units) ratio Sales (units) ratio
AUSTRIA 353,320 7,154 2.0% 13,726 3.9%
BELGIUM 546,558 14,299 2.6% 26,870 4.9%
BULGARIA 33,809 106 0.3% 1,301 3.8%
CROATIA 50,770 n.a. n.a. n.a. n.a.
CZECH REPUBLIC 271,595 307 0.1% 3,133 1.2%
DENMARK 221,591 1,342 0.6% 8,443 3.8%
ESTONIA 25,618 43 0.2% 1,231 4.8%
FINLAND 118,529 3,055 2.6% 11,569 9.8%
FRANCE 2,110,748 36,835 1.7% 106,515 5.0%
GERMANY 3,441,261 54,617 1.6% 109,853 3.2%
GREECE 88,115 199 0.2% 2,547 2.9%
HUNGARY 116,265 1,192 1.0% 4,731 4.1%
IRELAND 131,356 948 0.7% 5,383 4.1%
ITALY 1,970,497 4,827 0.2% 68,225 3.5%
LATVIA 16,698 56 0.3% 400 2.4%
LITHUANIA 25,836 52 0.2% 767 3.0%
LUXEMBOURG 52,775 n.a. n.a. n.a. n.a.
NETHERLANDS 414,538 11,079 2.7% 28,746 6.9%
POLAND 484,190 1,068 0.2% 17,964 3.7%
PORTUGAL 222,134 4,082 1.8% 8,774 3.9%
ROMANIA 105,083 188 0.2% 2,227 2.1%
SLOVAKIA 95,976 209 0.2% 2,145 2.2%
SLOVENIA 62,532 456 0.7% 1,461 2.3%
SPAIN 1,234,931 7,476 0.6% 62,998 5.1%
SWEDEN 379,393 19,678 5.2% 39,240 10.3%
UNITED KINGDOM 2,540,617 47,298 1.9% 119,821 4.7%
EUROPEAN UNION 15,114,735 216,566 1.4% 648,070 4.3%
EU15 13,826,363 212,889 1.5% 612,710 4.4%
EU (New Members) 1,288,372 3,677 0.3% 35,360 2.7%
ICELAND 21,325 n.a. n.a. n.a. n.a.
NORWAY 158,650 62,313 39.3% 82,813 52.2%
SWITZERLAND 312,155 8,391 2.7% 16,805 5.4%
EFTA 492,130 70,704 14.4% 99,618 20.2%
EU + EFTA 15,606,865 287,270 1.8% 747,688 4.8%
EU15 + EFTA 14,318,493 283,593 2.0% 712,328 5.0%

Source: Automobile Manufacturers' Association (ACEA)
Notes: ECV (electrically chargeable vehicle) = BEV (battery electric vehicles) + EREV (extended-range electric vehicles) + FCEV (fuel cell electric vehicles) + PHEV (plug-in hybrid electric vehicles)
HEV: hybrid electric vehicles

 

Sales of electric vehicles in the European nations

COUNTRY BEV PHEV ECV HEV
2017 2016 Change
(%)
2017 2016 Change
(%)
2017 2016 Change
(%)
2017 2016 Change
(%)
AUSTRIA 5,433 3,826 42.0 1,721 1,237 39.1 7,154 5,068 41.2 6,572 3,474 89.2
BELGIUM 2,709 2,054 31.9 11,287 6,671 69.2 14,299 8,984 59.2 12,571 9,501 32.3
BULGARIA 68 5 1260.0 38 8 375.0 106 13 715.4 1,195 580 106.0
CZECH REPUBLIC 307 200 53.5 n.a. n.a. n.a. 307 200 53.5 2,826 1,541 83.4
DENMARK 698 1,312 -46.8 614 572 7.3 1,342 1,920 -30.1 7,101 6,781 4.7
ESTONIA 26 35 -25.7 17 0 n.a. 43 35 22.9 1,188 765 55.3
FINLAND 502 223 125.1 2,533 1,207 109.9 3,055 1,430 113.6 8,514 4,678 82.0
FRANCE 24,910 21,752 14.5 11,868 7,429 59.8 36,835 29,194 26.2 69,680 50,956 36.7
GERMANY 25,056 11,410 119.6 29,439 13,751 114.1 54,617 25,214 116.6 55,236 34,245 61.3
GREECE 38 12 216.7 161 31 419.4 199 43 362.8 2,348 1,545 52.0
HUNGARY 749 172 335.5 443 171 159.1 1,192 343 247.5 3,539 1,674 111.4
IRELAND 622 392 58.7 326 298 9.4 948 690 37.4 4,435 2,570 72.6
ITALY 1,967 1,377 42.8 2,646 1,307 102.4 4,827 2,819 71.2 63,398 37,240 70.2
LATVIA 39 22 77.3 17 18 -5.6 56 40 40.0 344 286 20.3
LITHUANIA 52 64 -18.8 n.a. n.a. n.a. 52 64 -18.8 715 401 78.3
NETHERLANDS 9,897 4,268 131.9 1,158 18,628 -93.8 11,079 22,939 -51.7 17,667 10,972 61.0
POLAND 439 108 306.5 585 404 44.8 1,068 569 87.7 16,896 10,050 68.1
PORTUGAL 1,640 756 116.9 2,416 1,048 130.5 4,082 1,845 121.2 4,692 3,204 46.4
ROMANIA 188 74 154.1 n.a. n.a. n.a. 188 74 154.1 2,039 1,089 87.2
SLOVAKIA 209 59 254.2 n.a. n.a. n.a. 209 59 254.2 1,936 363 433.3
SLOVENIA 288 144 100.0 165 46 258.7 456 198 130.3 1,005 369 172.4
SPAIN 3,920 2,005 95.5 3,370 1,511 123.0 7,476 3,654 104.6 55,522 30,897 79.7
SWEDEN 4,217 2,945 43.2 15,447 10,296 50.0 19,678 13,260 48.4 19,562 13,759 42.2
UNITED KINGDOM 13,597 10,264 32.5 31,154 24,899 25.1 47,298 37,102 27.5 72,523 51,789 40.0
EUROPEAN UNION 97,571 63,479 53.7 115,405 89,532 28.9 216,566 155,757 39.0 431,504 278,729 54.8
EU15 95,206 62,596 52.1 114,140 88,885 28.4 212,889 154,162 38.1 399,821 261,611 52.8
EU (New Members) 2,365 883 167.8 1,265 647 95.5 3,677 1,595 130.5 31,683 17,118 85.1
NORWAY 33,025 24,222 36.3 25,165 15,517 62.2 62,313 44,908 38.8 20,500 17,259 18.8
SWITZERLAND 4,773 3,295 44.9 3,404 2,829 20.3 8,391 6,403 31.0 8,414 7,673 9.7
EFTA 37,798 27,517 37.4 28,569 18,346 55.7 70,704 51,311 37.8 28,914 24,932 16.0
EU + EFTA 135,369 90,996 48.8 143,974 107,878 33.5 287,270 207,068 38.7 460,418 303,661 51.6
EU15 + EFTA 133,004 90,113 47.6 142,709 107,231 33.1 283,593 205,473 38.0 428,735 286,543 49.6

Source: Automobile Manufacturers' Association (ACEA)
Notes: Only countries for which sourced data is available are listed. Czech Republic, Lithuania, Romania: Can't distinguish between BEV and PHEV.
ECV (electrically chargeable vehicle) = BEV (battery electric vehicles) + EREV (extended-range electric vehicles) + FCEV (fuel cell electric vehicles) + PHEV (plug-in hybrid electric vehicles)
HEV: hybrid electric vehicles

 

Norway, the EV superpower

The Norwegian government has set a goal of making all new vehicles zero-emission vehicles by 2025. Not only can EV and PHV users receive subsidies and tax reduction measures, they also receive various incentives for road and parking fees, helping to spread the introduction and popularization of EVs.

Reference link: MarkLines Emissions & CO2 - Norway Passenger Cars & Light Duty Trucks


In December 2017, the ESA (EFTA Surveillance Authority) approved Norway’s tax exemptions regarding zero-emissions vehicles. For the next three years, the Norwegian government has eliminated all value-added taxes on EVs, established a 6-year subsidy period for taxes such as automotive taxes and registration taxes, and for FCVs have implemented a 6-year subsidy period for value-added taxes.


Looking at the EV models sold in Norway, various German vehicles and other brands released BEVs and PHEVs in the C- and D-Segments. BEVs include VW e-Golf, BMW i3, Tesla Model X and Model S, Nissan Leaf, and Renault ZOE. PHEVs include SUV models such as the Mitsubishi Outlander and Mercedes-Benz GLC, as well as VW Passat and Golf, and the BMW 2 Series. The sales of Korean EVs such as Hyundai Ioniq and Kia Niro have also increased.

 

Major electric vehicles in Norway (Sales volume: units)

Brand Model EV/HV/PHV Segment 2016 2017
VW Golf EV C 4,705 6,639
BMW i3 EV B 3,953 5,036
Tesla Model X EV SUV (Class E) 1,430 4,748
Mitsubishi Outlander PHV SUV (Class D) 5,136 4,067
Tesla Model S EV E 2,051 3,712
Nissan Leaf EV C 4,162 3,374
VW Passat PHV D 2,552 3,247
Mercedes-Benz GLC-Class PHV SUV (Class D) 626 2,600
Renault ZOE EV B 1,818 2,533
VW Golf PHV C 4,337 2,439
Hyundai Ioniq HV/EV/PHV C 217 2,371
BMW 2 Series PHV C 1,332 2,171
Volvo Cars XC90 PHV SUV (Class E) 688 1,904
Kia NIRO HV/PHV SUV (Class C) 501 1,800
Audi A3 PHV C 2,283 1,757

Source: MarkLines yearly sales figures by model in Norway



Production Forecast by LMC Automotive: Western European production to be 14.7 million units in 2020-2021

(LMC Automotive, October, 2018)

Western European light vehicle production forecast

According to LMC Automotive's production forecast (October, 2018), Western European light vehicle production in 2018-2019 will be around 14.5 million units, and recover to 14.7 million units in 2020-2021.


LMC Automotive comments on the trend of 2018; As expected, Q2 pan-European Light Vehicle production volumes are proving to be strong, with growth now estimated to exceed 5% when compared to the same period last year. This strength is largely a result of seasonal base effects, principally connected to the timing of Easter, but there have been indications that a number of OEMs have overbuilt to feed stocks. We believe that much of this stock growth is a result of the looming change in the official type-approval procedure to measure fuel consumption and CO2 emissions - the so-called shift from NEDC to WLTP.
From 1 September, all new vehicles for sale will have to be homologated using the WLTP testing protocol. However, there is a conditional exemption for those models built prior to 1 June 2018 and this will have contributed to the growth in stocks through Q2. This stock is expected to provide a buffer to support market demand after 1 September, as a bottleneck in WLTP testing is delaying the mandatory certification of some model lines.


Comment on LMC Automotive's trade issue; It is worth reiterating that risks to the current trade environment are an enduring threat to our production forecast. European producers export almost 3.5 mn units to key overseas markets each year, with the US receiving over a third of this volume. While US threats to impose a 25% tariff on European vehicle imports may prove to be a negotiating position, the consequences of protectionism, whatever the degree, will cut European export demand and thus Light Vehicle production in the region.
Tit-for-tat retaliatory tariffs currently highlight EU-US trade tension. In May, President Trump initiated a trade investigation into whether vehicle imports had damaged the US auto industry. The fear is that this could ultimately lead to tariffs of up to 25%, based on the same ‘national security’ grounds used to impose US duties on steel and aluminium imports. Europe exported 1.2 mn vehicles to the US in 2017, so the risks to longer-term European production are significant and could be upwards of 250k units annually.


While threats to global trade and the world economy have risen, eurozone growth remains in its strongest phase since the financial crisis and this is clearly helping to support market‐led Light Vehicle production growth. However, risks are growing within Europe. Political uncertainty fuelled by recent elections and the enduring migrant crisis have the potential to destabilise confidence in financial markets and ultimately raise longer-run questions concerning the solidity of the EU and its structures.
Turning to the UK, its economy and vehicle market are already showing tangible signs of weakness. While this is somewhat cyclical in nature, Brexit‐related impacts are feeding through. We continue to assume that the more profound economic effects associated with the process of the UK leaving the EU, and the actual departure, will prove to be a negative drag on UK vehicle sales and European production, both now and in the longer term.

 

Western European light vehicle production forecast

(Units)

COUNTRY 2015 2016 2017 2018 2019 2020 2021
Total 14,166,220 14,672,833 14,763,249 14,540,223 14,498,942 14,733,948 14,778,762
Germany 5,959,901 5,974,801 5,843,653 5,540,085 5,625,449 5,541,573 5,624,555
Spain 2,676,405 2,835,776 2,772,128 2,729,680 2,773,226 3,108,260 3,039,878
France 1,955,981 2,086,283 2,226,853 2,251,011 2,289,937 2,086,954 2,099,963
UK 1,664,169 1,805,804 1,732,261 1,600,774 1,591,118 1,700,881 1,627,578
Italy 965,049 1,062,818 1,098,377 1,039,669 959,078 1,050,715 1,154,967
Sweden 181,453 203,167 238,888 305,250 293,888 277,224 314,422
Belgium 369,179 354,003 332,983 286,932 253,107 320,192 270,010
Portugal 152,512 138,895 165,211 297,480 238,493 208,755 205,463
Netherlands 57,019 87,609 169,137 221,742 194,060 186,370 174,899
Austria 104,933 75,709 92,160 164,207 176,836 172,532 165,853
Finland 79,619 47,968 91,598 103,393 103,750 80,492 101,174

Source: LMC Automotive "Global Automotive Production Forecast (October 2018)"
(Note) 1. Data indicate figures of only small-size vehicles, including passenger cars and light commercial vehicles with a gross vehicle weight of under 6 tons.
2. All rights reserved. Reproduction of any data will require permission of LMC Automotive.
For more detailed information or inquiries about forecast data, please contact LMC Automotive.


------------------
Keywords
Europe, EU, Germany, France, U.K., Norway, emissions, WLTP, Brexit, diesel, EV, electric vehicles, electrification

<Automotive Industry Portal MarkLines>