The European market for electric vehicles (EVs) is currently experiencing an unprecedented downturn, raising alarms among industry stakeholdersThe decline in sales has prompted the European Automobile Manufacturers' Association (ACEA) to call for urgent measures to revive the industry and enhance the competitiveness of the European Union's automotive sector before the new carbon emissions regulations come into force in 2025.

In a bid to decarbonize transportation by 2050, the EU has set stringent limits on CO2 emissions for new vehicles starting in 2025. These regulations mandate that the average emissions per kilometer for new cars must be reduced to 93.6 grams—a notable drop from the 116 grams stipulated for 2024. This policy not only compels automakers to adopt more aggressive emission reduction strategies but also signals a potential decrease in the production of traditional combustion engine vehicles

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Given the significant emission reduction benefits afforded by electric cars, the urgency of transitioning to electric mobility is clearYet, despite these aspirations, pure electric vehicles constitute only 12.5% of new car registrations in the EU, leaving a considerable gap between current figures and the ambitious targets set by the EU.

Recent statistics reveal that the sales of pure electric vehicles in the EU plummeted by 43.9% in August compared to the previous year, marking a decline that has persisted for four consecutive monthsGermany and France, the two powerhouses of the EU's electric vehicle market, reported staggering sales decreases of 68.8% and 33.1%, respectivelyThis sharp decline has significantly impacted overall new car sales across the EU, which dropped by 18.3% year-on-year, achieving its lowest point in nearly three yearsLuca de Meo, the ACEA President and CEO of Renault Group, has warned that if the sales of electric vehicles do not notably improve, automakers could be faced with hefty fines and may have to curtail the production of gasoline vehicles, further exacerbating market imbalances and resource distribution challenges.

The causes behind the drastic drop in demand for electric vehicles in Europe are complex and multifaceted

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On one hand, the reduction in government subsidies has led to a sharp increase in purchase costs, dampening consumer enthusiasmFor instance, in Germany, subsidies for pure electric vehicles were significantly cut in 2023, directly affecting market performanceOn the other hand, the overall economic malaise in Europe has diminished consumers' purchasing power when it comes to high-value items, leading electric vehicles—classed as non-essential goods—out of many consumers' reach.

Despite the substantial investments that European automakers have made in electrification, the current performance of the market remains bleakVolkswagen, regarded as a leader in Europe's electrification efforts, has poured over €80 billion into this transition and plans to invest an additional €180 billion over the next five yearsHowever, the decline in sales has directly impacted its financial health, with reports indicating a 14% decrease in net profit during the first half of the year, largely due to poor electric vehicle sales in both Europe and the United States

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Other manufacturers such as Stellantis, BMW, Renault, and Mercedes-Benz have also experienced varying declines in earnings during the same period.

Faced with a rapid contraction in the electric vehicle market and the impending new carbon emissions regulations, ACEA has pointed out that existing rules have failed to adequately consider the profound changes in geopolitical and economic environments in recent yearsAdditionally, the inflexibility of the regulations makes it challenging to adapt to rapid societal shifts, ultimately undermining the EU's competitiveness in the electric vehicle marketThe lack of essential conditions such as adequate charging infrastructure and hydrogen facilities, a competitive manufacturing environment, affordable green energy, tax breaks, and secure supplies of raw materials, hydrogen, and batteries are further hindering the widespread adoption of electric vehicles

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Furthermore, sluggish economic growth, low consumer acceptance, and distrust in infrastructure are exacerbating the market's woes.

The European automotive industry is striving to tackle the dual pressures of tightening deadlines and stringent regulations as it grapples with the slowdown in electric vehicle demandHowever, several automakers may still face substantial fines for failing to meet carbon emission standardsFor everyday consumers, these policy changes will inevitably escalate the costs of purchasing vehiclesOn one hand, stricter emissions standards might drive up the prices of gasoline cars; on the other hand, although electric vehicles present long-term operational cost advantages, the sky-high initial purchase costs continue to deter many buyersThus, finding a middle ground between electric and combustion vehicles, helping consumers balance price differences against environmental considerations, has become a critical challenge for manufacturers.

To tackle this pressing issue, the review of vehicle CO2 regulations originally slated for 2026 and 2027 will be advanced to 2025, alongside discussions for short-term relief measures aimed at supporting automakers in achieving emissions targets

Concurrently, manufacturers are urging governments to reassess the subsidy structure for electric vehicles to stimulate market demand.

Interestingly, amid the slump in pure electric vehicle sales, the European market for hybrid vehicles has been witnessing an upward trend, serving as a transitional option for consumersData indicates that the market share of hybrid vehicles in Europe has ascended from 24% last year to 31.3%, with traditional hybrids and mild-hybrid models experiencing particularly notable growth.

Even though the current landscape presents numerous challenges for the European electric vehicle market, many within the industry and beyond maintain a strong belief in the long-term prospects for electric mobility in the regionContinuous advancements in technology and reductions in costs are expected to bolster the competitiveness of electric vehiclesAdditionally, the EU's steadfast commitment to green transportation will provide a sustained impetus for the electric vehicle market's development