The sales of new energy vehicles in Europe fell sharply in April, and how to solve the "capacity bottleneck"

The European new energy vehicle market has handed over a relatively "bad" report card.

According to the latest data from marklines and other market research institutes, in eight European countries (namely Germany, France, Britain, Italy, Spain, Portugal, Norway and Sweden), which account for nearly 90% of New Energy Vehicle sales in Europe, the number of new energy vehicle registrations in April was only 122,000 units, down 39% month-on-month and 5% year-on-year.

All segments performed poorly. In April, the registration of new energy vehicles in Germany and France, the two largest markets for new energy vehicles in Europe, fell by nearly 30% month-on-month. As the market with the highest penetration rate of new energy vehicles, Norway fell by more than 40% month-on-month.

Guo Fangjie, head of UnionPay big data new energy automobile industry research and a special overseas automobile researcher of Dolphin Investment Research, said in an interview with the first financial reporter that the automotive industry has always been known for its high threshold and high elimination rate, and at present, the biggest problem facing new energy vehicle companies is "production capacity bottleneck". "This is not only an important reason for the current restriction of sales in the European new energy market, but also the key to whether the penetration rate of new energy vehicles in the region can be further improved in the future." He said.

Supply and demand are under pressure

Guo Fangjie said that from the supply side, the main reason for the decline in sales of new energy vehicles in Europe is still from Tesla's "absence". Although Tesla's Berlin plant was officially put into operation at the end of March, the production capacity has not yet been pulled up, and the supply of the European market still needs to rely on gigafactories in other countries. Due to the recent suspension of production at some of Tesla's factories, this has affected deliveries to the European market to some extent. He said.

According to data from JATO Dynamics, Tesla will sell about 168,000 vehicles in Europe in 2021, with a market share of 13.9% for pure electric vehicles in Europe. Tesla's data shows that the company produced 305,000 vehicles in the first quarter of 2022, which is the first quarterly decline in production capacity since the outbreak of the epidemic.

In a recent investor conference call, Tesla's chief financial officer KirkHorn explained that the reason is the supply bottleneck caused by the shutdown of Tesla's factories and upstream suppliers. In April, German auto parts and chip supplier Bosch also said that some factories had suspended production.

The problem of car companies encountering supply bottlenecks is not an isolated case. Recently, Volkswagen Group, which has the highest market share in the European new energy vehicle market, said that as of the 4th, due to the shortage of semiconductors and wiring harnesses, the company's new energy vehicles in Europe and the United States this year have been sold out.

On the demand side, the European new energy vehicle market is also under pressure. The reason for this is that the current prices of commodities and new energy vehicles are rising, while the cost of living of European people is increasing, and real wages are still shrinking, which makes the consumption motivation of European people, especially the working class, greatly affected.

According to bernstein, a market research firm, the Model Y, sold 30 percent in the year to March. Tesla CEO Musk said: "This is because the price of upstream manufacturers is too high, and the supplier's parts asking price is sometimes 20% to 30% higher than last year." According to market research firm Benchmark, the average price of lithium carbonate was about $60,000/ton in March, up 20% year-on-year. Bosch also said that the increase in raw material, chip, energy and logistics costs needs to be borne by customers.

According to Forbes, at present, the starting price of most new energy vehicles in Europe is about 30,000 to 50,000 euros. And if you want to make the average working class able to afford the price of new energy vehicles is about 10,000 euros. In the fourth quarter of last year, real wages for workers in Germany and Italy fell by 3 percent, and real wages for workers in Spain and the Netherlands fell by more than 4 percent, according to the European Central Bank.

According to Germany's Federal Motor Vehicle Authority (KBA), Europe's largest auto market, private car sales in the country fell nearly 18 percent year-on-year in April.

The focus of future development of car companies

According to the calculation of the brokerage company CITIC Construction Investment, as of April, the penetration rate of new energy vehicles in eight European countries reached 19.7%. Under the background of the current slightly weak European new energy vehicle market, can the penetration rate of new energy vehicles in the region be further improved?

Guo Fangjie believes that the possibility of improvement is greater. "From the policy side, many European countries are still promoting stricter carbon emissions laws to restrict car companies. If the transformation of electrification is not accelerated, car companies may face huge fines. He said.

The UK government made another proposal in April: by 2028, more than half of all new cars sold in the UK will have to be all-electric. By 2024, all-electric vehicles need to account for nearly 22% of the market share.

In addition, the situation in Ukraine continues to be tense, and the European Union is also considering an embargo on Russian oil. On the 4th, European Commission President von der Leyen proposed to member states the sixth plan to sanction Russia, planning to implement a comprehensive embargo on Russian oil in the next 6 months to 8 months. Eurostat data shows that 26% of EU oil imports come from Russia. Previously, the United Kingdom had said it would phase out Russian oil imports.

"In the future, whether the penetration rate of new energy vehicles in Europe can be further improved depends on whether car companies can increase production capacity as soon as possible." Guo Fangjie said, "The production method of new energy vehicles is both complex and different from traditional fuel vehicles. Only enterprises that can continuously innovate and organize innovation, find efficient production methods, and reduce production costs can stand out and occupy the dominant position in the industry. ”

Musk has repeatedly said that Tesla's basic focus this year is to expand production, not to launch new models. "Tesla has postponed production of new cars such as its Cybertron trucks until next year, which will help us focus on existing models and be able to scale up faster at new factories." He said.

Musk also said that the rapid ramp-up of Tesla's new factories in Berlin and Austin will allow the company to overcome bottlenecks, while the company is also looking to expand the capacity of its factory in Fremont, California. "We are also looking at new plant locations and may announce options at the end of the year." He said.

However, upstream companies are cautious about whether they can increase production capacity. "Chip shortages and other issues persist, and the previously expected 88 million vehicle sales in 2022 are likely to be unattainable." Bosch said recently.