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Automotive Industry
European investment in electric vehicles will remain largely unaffected by weakening EV demand, in contrast to the US, according to the research arm of the Fitch ratings agency.
Automakers and analysts, such as Fitch and UBS, have forecast weaker EV growth in the near term for Europe.
The slowdown is driven by high interest rates, shrinking new-car order banks due to supply chain normalization and sluggish economic growth, said Anna-Marie Baisden, head of autos for Fitch’s BMI research arm.
Volkswagen Group has seen its EV order bank in Europe halved to 150,000, Chief Financial Officer Arno Antlitz said on the group’s third-quarter earnings call on 23 October. The number was “below our ambitious targets,” he said.
EV growth in Europe will slow to 15% in 2024 over 2023 numbers, UBS said in a recent note to investors. That is down on the 25% increase on figures expected by UBS this year.
“BEVs have become a tough sell in Western markets,” UBS analyst Patrick Hummel said in the note.
The EV slowdown in the U.S. has caused General Motors to row back on its EV growth plan, while Ford has pushed back $12 bn of EV spending.
'Bullish' on EVs
However, Fitch does not expect European investment to follow the same patten.
“There is still a lot of investment channeled toward EVs in Europe, and it remains the end goal for manufacturers even if we see demand slow,” Baisden said.
She said Renault’s push to float its Ampere EV division shows that European automakers are still bullish on electric vehicles.
Investment in battery plants and other EV investments in Europe largely remained on track as automakers forecast long-term growth in the sector, driven partly by legislation.
The European Union has effectively banned combustion engine cars after 2035, by requiring all new cars sold after that date to be zero emissions, with a loophole permitting those powered by Carbon Dioxide -neutral e-fuels.
Also driving EV investment in Europe are incentives offered as part of the European Green Deal, which reward the localization of the battery supply, Baisden said.
In October the EU approved France’s €659 m ($716 m) grant to support Renault-backed battery maker Verkor in researching and developing new production processes for lithium ion EV batteries. Verkor is building a new battery plant in Dunkirk, northern France.
Automakers are looking to the EU to strengthen the Green Deal to better compete with the U.S. government's IRA package of green-angled incentives, which has lured cash for EV investment away from Europe in recent months.
Fitch is positive that European EV investment will remain on track despite Ford and its Turkish partner Otosan announcing they would scrap a planned battery plant, saying that “the timing is not appropriate for a battery cell investment.”
Ford builds vans for Europe in Turkey. However the country is outside the European Union and would not be eligible for Green Deal incentives.