Things in the world don't go in one direction so simply. The European Union confidently planned to ban the sale of internal combustion engines by 2035 and fully transition to electrification. But for now, it seems that the EU is overestimating itself.
Porsche CFO Rutz Marschke said in a public statement in Marken in Singapore that the EU's plan to ban the sale of internal combustion engines by 2035 could be delayed. This is based on the premise that the current slowdown in demand for electric vehicles in the European new car market has led the European Union to reconsider its phased abolition plan. Of course, from the consumer's point of view, the lack of charging stations and the regression of subsidies for electric vehicles are also at play. In the process of using electric vehicles, various problems are also exposed.
[United Kingdom]
The UK has pushed back its initial target of banning internal combustion engines by 2030 by 5 years to 2035. The UK stresses the need for a more pragmatic, proportional and realistic approach to achieving zero emissions, while maintaining all international commitments.
New provisions were also proposed for the phasing out of internal combustion engine engines and other measures. At least for now, the initial costs are high and should be chosen by the consumer, not imposed by the government. In particular, households and small and medium-sized enterprises (SMEs) struggling with the cost of living have expressed concerns about practicality.
Instead, he said that the majority of cars sold in 2030 are expected to be electric, and he believes in the transition to electric vehicles. He also mentioned that the state will make more efforts to establish a nationwide charging infrastructure before phasing out internal combustion engines.
The UK no longer provides subsidies for the purchase of electric vehicles and further strings emission standards. This means that a certain percentage of total sales should be zero-emission. At least 22% of the cars sold from this year should be zero-emission vehicles. The market share of electric vehicles in 2023 is 16.5%. The target is 10% for MPVs. By 2030, quotas for cars and new trucks will be increased by 80% and 70%, respectively. All new cars sold through 2035 must be electric.
For each diesel locomotive sale that exceeds the quota, the car company pays a fine of £15,000. As a result, Toyota and Ford, the UK's largest car companies, could face billions of dollars in fines until September.
【Germany】
Germany will stop paying subsidies of 3,000-4,500 euros for battery electric vehicles from December 17, 2023. This is because the German Constitutional Court in November ruled that the existing 60 billion euro climate change countermeasures fund was unconstitutional and that it would be difficult to secure financial resources. Subsidies for electric vehicles are set aside by the fund and amount to 2 billion euros per year.
Just a few days ago, the German government also announced that it would continue until the end of 2024, but the policy of prioritizing the reduction of funds was interrupted due to the exhaustion of part of the budget in 2023.
In 2023, in the German new car market, sales of battery electric vehicles will be 524,219 units, an increase of 11.4%. The market share is 18.4%. However, due to the interruption of subsidy payments, it is possible to reduce up to about 200,000 units in 2024, and it is expected that the high-end of electric vehicles will be hindered. Right now, car companies are paying subsidies in response to the subsidy cut. Corporate earnings have further declined.
【France】
France also reduced EV subsidies on December 15. The French government has decided to exclude Chinese-made battery electric vehicles such as the Tesla Model 3 from the 5,000 to 7,000 euro subsidy. The Italian government, which has not yet paid the subsidy, is also considering the same strategy for low-cost electric vehicles made in China.
[The European Union, with an increase of more than 40% in 7 years, with an average annual growth rate of about 6%, is under great pressure]
Coupled with this trend, the recent release of electric van sales data by the European Automobile Manufacturers Association (ACEA) shows that the transition to electric vehicles should not be underestimated. In the six years from 2017 to 2023, the share of plug-in hybrid electric vehicles and hybrid electric vehicles in new car sales increased by 30.7%, according to ACEA. In contrast, battery electric vehicles grew by only 13.1%.
In Europe, the basic policy of zero is the goal of all new vehicles by 2035. While there were various discussions through the Fit for 55 strategy, last year it was decided to exclude vehicles that only use synthetic fuel e-fuels.
By the way, there is still controversy about eFuel. According to environmental NGO T&E, this means that only wealthy people can buy synthetic fuels, and the low-cost promotion of synthetic fuels is a big problem.
In 2030, the cost per litre of E-Fuel in Germany could exceed 2.8 euros, a complex energy-intensive production process that costs up to 50% more than regular gasoline today. T&E claims that, on average, drivers need at least €2,300 per year to fill their tanks with synthetic petrol.
On the other hand, there are also those who argue that e-fuel is needed from the perspective of new energy used in cars equipped with diesel locomotives that have already been sold. eFuel reduces greenhouse gas emissions by 20% to 40% compared to fossil fuels. That is, if it is not zero-carbon, it can be a realistic alternative.
【Volkswagen】
Volkswagen is setting a target to increase the proportion of battery electric vehicle sales to 50% by 2030 (70% in Europe and 50% in the US and China). However, the sales ratio in 2023 is 8.3%. In order to achieve the target, it would have to increase by more than 40 per cent over the remaining seven years, with an average annual growth rate of about 6 per cent. Therefore, some people think that this is difficult in reality.
Unlike the news that focuses on the growth of battery electric vehicles, the demand for hybrid electric vehicles and plug-in hybrid electric vehicles continues to increase. To a large extent, this is the transition from internal combustion engines to electrification. For this reason, Japan Automobile Co., Ltd. is continuing to develop engines for hybrid electric vehicles and plug-in hybrid electric vehicles, especially among Japanese automobile companies. This is different from that of existing diesel locomotives, where the goal is to improve fuel efficiency and driving performance.
【North American Market】
In fact, in the North American market, the growth momentum of battery electric vehicles is slowing, but the sales of hybrid electric vehicles are increasing. This is data released by Fuji Economic Research Institute in July 2023. Fuji Keizai predicts that global sales of hybrid electric vehicles will reach 11.76 million units in 2035, about 2.8 times that of 2022. Plug-in hybrid electric vehicles are expected to grow by about 2.4 times to 6.5 million units. This means that a certain level of demand will be maintained in the future.
At the same time, the development of internal combustion engine engines is also different from the past, and is being developed in special forms of hybrid electric vehicles and plug-in hybrid electric vehicles. Until now, hybrid electric vehicles and plug-in hybrid electric vehicles used the same engine as gasoline engine vehicles. The number of engines developed specifically for hybrid vehicles is expected to increase in the future. That is, the development of engines that meet the characteristics of the hybrid system.
For example, Nissan's e-Power system and Honda's e:HEV engine are examples. Mazda has even resumed rotary engine research with the aim of using it in plug-in hybrid vehicles.
The U.S. market will sell 1189051 electric vehicles in 2023. The market share continues to increase, but slowly. According to Kelley's Blue Book, the share of electric vehicles in the U.S. market increased slightly to 7.6% in 2023 from 5.9% in 2022. The electric vehicle market is growing, but not as fast as in previous years.
【Tesla】
Tesla's sales are also sluggish, and when Tesla announced its fourth-quarter 2023 results, it expected that the growth of its automotive business in 2024 would decline significantly.
Tesla is currently in between two major growth trends. The first growth began with the global expansion of the Model 3 and Model Y platforms, and the next growth is expected to begin with the global expansion of the next-generation vehicle platform. As Tesla is working to launch a new generation of models, it is expected that the growth rate of vehicle production in 2024 may be significantly lower than the growth rate achieved in 2023. At the end of 2023, Elon Musk had said that 2024 would be a difficult year due to issues such as high interest rates.
Tesla's new car sales in 2023 will increase by 38% year-on-year. On the contrary, the energy storage business increased by 135%. In 2024, the distribution and revenue growth rate of the energy storage business is expected to outpace that of the automotive business.
In Tesla's fourth-quarter 2023 results, operating profit fell 47% year-on-year to $2.064 billion, marking four consecutive quarters of losses. According to the analysis, the price reduction and the lack of mass production of the Cybertruck are the reasons for this.
Tesla has been cutting prices in the U.S. and China since the fall of 2022 in an effort to boost sales. But in the context of increased competition, the desired results were not achieved. Most importantly, the deterioration in accounting due to lower prices has been particularly pronounced. In particular, the mismatch in the number of stainless steel and 4680 batteries used by the Cybertruck is also a problem.
As a result, Tesla's operating profit fell to 8.2% by half, from 16% in the same period last year. While this is an improvement from 7.6% in the third quarter, it is half the 19.2% in the first quarter of 2022.
Tesla's share of sales in the U.S. electric vehicle market was 51% in the fourth quarter of 2023, down 7 percentage points from 58% in the same period last year, according to Cox Automotive, a U.S. market research firm.
Tesla's weakness is linked to the strength of Chinese companies. At the beginning of the year, BYD cut the price of battery electric vehicles by up to 15% in Germany.
【BYD and Chinese Electric Vehicles】
BYD will sell 3.02 million new vehicles in 2023, ranking among the top 10 in global auto sales for the first time. In particular, BYD has become a threat by expanding its market to Europe, Southeast Asia, and North America. Even if it is not this year, it is a foregone conclusion that BYD will surpass Tesla in the market share of battery electric vehicles in 2024. In contrast to Tesla's focus on innovation in production methods, BYD is also producing its own electric vehicle components, such as drive motors and inverters, ECUs, and power semiconductors, not only in batteries. Except for tires and glass, everything else is produced in-house.
It is different from the decline of electric vehicles abroad. On the contrary, Chinese government officials said that China is expected to achieve the goal of 50% penetration of new energy vehicles 10 years ahead of schedule. The company plans to achieve a 50% penetration rate of new energy vehicles by 2025. In China, new energy vehicles do not include hybrid electric vehicles, only plug-in hybrids, pure electric vehicles, and hydrogen fuel, so China's electrification is more aggressive.
Turning trams can be described as a tsunami. But at present, with the exception of China, the switch to electric vehicles is not as easy as imagined.