Europe’s electric vehicle (EV) market has slowed in the first half of 2024, forcing automakers to scale back their ambitions. “The EV slowdown is clearly happening, but it is not yet clear if this is just a temporary setback or a longer-term trend,” HCSS analyst Ron Stoop tells Automotive Logistics, confident there is no reason to panic yet.
“Overall, the sales growth of EVs has been robust over the last few years with around 20-30% growth per year, so the upward trend [in the longer run] is quite steep,” Stoop added.
The EV slowdown can certainly impact battery production. More than half of planned plants are at risk of being delayed, scaled down or even cancelled, NGO Transport & Environment (T&E) estimated. However, so far most of the cancelled projects are to be found in western and southern Europe, in countries such as Germany, Italy and the UK, Stoop pointed out.
“The first reason that investments in mostly western and southern Europe are being cancelled is because production there is relatively more expensive,” Stoop said, citing the labour, land and energy costs. “Therefore, they are the first to be dropped when demand falls, or competitors undercut the market because these locations are the least profitable. Central and eastern Europe locations are easier to maintain when turnover expectations are reduced because of the lower production costs.”
“Another reason [why EV battery plants are primarily cancelled in Western Europe] is that there were more investments planned in Germany, Sweden, Italy, Spain and the UK in the last five years than in CEE countries. Therefore, the dropoff is larger as well,” Stoop added.
“The key challenge for the battery sector is to be found on the demand side: are there enough potential customers to justify long-term spending on production capacity in Europe? So long as the demand is there, there will be a strong incentive to serve it,” Stoop explained.
“Whether this happens inside or outside Europe is subject to national and EU policy, which could exert considerable influence on the incentives for producers to build factories in Europe through local content requirements, import tariffs and other policies, or outside Europe due to high production price differentials and affordable transport costs,” Stoop added.
Read the full article by Vladislav Vorotnikov in Automotive Logistics.
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