The crisis of the electricity sector

The European Commission has placed the transition to electric mobility at the centre of its industrial and environmental policies. Indeed, through a series of directives and regulations, it has set itself the goal of drastically reducing CO2 emissions from the transport sector and accelerating the adoption of zero-emission vehicles. However, the realization of this ambitious vision faces several challenges, including the need for massive investment in charging infrastructure, limited battery range, and the high cost of electric vehicles. To overcome these obstacles, the Commission has launched a number of initiatives, including the European Green Deal and the REPowerEU plan, which aim to support battery production, promote research and development in electromobility, and facilitate access to finance for businesses and consumers. A key pillar in the area of electric was also the adoption of a law in 2023 to ensure that new cars and vans registered in Europe from 2035 are all zero-emission.

However, one year after the enactment of this pivotal law as part of the transition to electric, the European market for zero-emission cars is far from rosy.

In fact, according to data for August, sales of electric cars within the single market plummeted precipitously, registering a minus 36 percent. This alarming figure, the worst since 2017, is the result of a combination of factors, including uncertainty over incentives, high costs, and the perception of low residual value.

Due to this significant contraction, the market share of electric models has dropped from 21.8 percent recorded in August 2023 to 16.6 percent last August. In fact, not surprisingly, major European automakers including Stellantis, Volkswagen, and Mercedes-Benz have experienced significant losses in market share.

The European Commission has placed the transition to electric mobility at the center of its industrial and environmental policies. Indeed, through a series of directives and regulations, it has set itself the goal of drastically reducing CO2 emissions from the transport sector and accelerating the adoption of zero-emission vehicles. However, the realization of this ambitious vision faces several challenges, including the need for massive investment in charging infrastructure, limited battery range, and the high cost of electric vehicles. To overcome these obstacles, the Commission has launched several initiatives, including the European Green Deal and the REPowerEU plan, which aim to support battery production, promote research and development in electromobility, and facilitate access to finance for businesses and consumers. A key pillar in the area of electric was also the adoption of a law in 2023 to ensure that new cars and vans registered in Europe from 2035 are all zero-emission.

However, one year after the enactment of this pivotal law as part of the transition to electric, the European market for zero-emission cars is far from rosy.

The high selling costs of these vehicles are one of the main brakes on sales, and this, even though the subsequent running costs are lower than traditional fossil-fueled vehicles, holds back many buyers from investing.

In Germany, a key country for the European car market, prices of battery electric vehicles remain about 20 percent higher than their internal combustion engine counterparts, even after considering subsidies and rebates.

Also complicating the situation in the European electric market is the issue of imports of Chinese-made electric vehicles.

In particular, since 2022, after the COVID-19 pandemic, the volume of electric cars from China has increased significantly, both due to lower vehicle costs, but also as a result of the Dragon's greater technological advancement, capable of producing large quantities at low cost. However, while China continued to produce vehicles at a rapid pace, in Europe, the electric crisis led to lower registrations of even these Chinese-made vehicles. This has implied overcrowding in European ports, such as in Zeebrugge, Belgium, where rows and rows of unsold electric vehicles are piled up, stopped even for several years. The port, after the drastic drop in sales recorded in 2024, risks saturation due to Chinese oversupply.

The Commission has intervened in the issue, promoting duties on imports of Chinese battery electric vehicles, in order to protect the European industry, which is already in crisis due to declining sales.

Long-term solutions, however, cannot be sustained based on duties on importers outside the market, but must promote incentives for the production and purchase of vehicles within the single market. In this sense, more promotion of electrics is needed especially in those countries where the proportion of the green segment compared to the rest of the other cars is very low, such as in Germany (25 percent), but especially Spain (12 percent) and Italy (9 percent).

More work will therefore be needed to support the market, in addition to incentives for consumers to purchase these vehicles, but also by encouraging the price of recharged energy and the widespread presence of charging stations. This is the only way to overcome the deep sales crisis and encourage the transition to green.

Mondo Internazionale APS - Riproduzione Riservata ® 2024