Economy
Analysis-Electric car demand set to stall in Europe’s ‘valley of death’
© Reuters. FILE PHOTO: A Tesla electric vehicle is plugged to a charger in a parking lot in Teia, north of Barcelona, Spain, October 31, 2023. REUTERS/Albert Gea/File Photo
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By Victoria Waldersee and Nick Carey
BERLIN/LONDON (Reuters) – After years of accelerating growth, Europe’s electric car sales appear to be entering a go-slow zone as drivers wait for better, cheaper models that are two to three years down the road.
Fully-electric sales in Europe were up 47% in the first nine months of 2023, but instead of celebrating, automakers including Tesla (NASDAQ:), Volkswagen (ETR:) and Mercedes-Benz (OTC:) sounded a sombre note.
High interest rates and a subdued market are putting customers off, they warned, with Volkswagen’s EV order intake half what it was last year.
Dealers in Germany and Italy as well as research by four global data analysis firms say there is more behind the slower uptake than economic uncertainty, with the consumers unconvinced that EVs meet their safety, range and price needs.
“The main problem is uncertainty,” said Thomas Niedermayer, head of a 45-year-old family-owned Bavarian car dealership.
“Many assume that the technology will improve and would rather wait three years for the next model than buy a vehicle now that will quickly lose value.”
Take Flavia Garcia and Tom Carvell in Edinburgh, Scotland.
Their 15-year-old hand-me-down Toyota (NYSE:) Auris, nicknamed Martina, needs replacing. With a petrol and diesel car ban nearing, the couple would consider an EV, but are put off by a lack of charging infrastructure, battery life fears and price.
AutoTrader says new EVs in Britain are still on average 33% more expensive than fossil-fuel models.
And most new models in the pipeline targeting entry-level consumers will not hit the market before 2025 at the earliest – by which time they will be contending with an expanded Chinese line-up from BYD (SZ:) to Nio (NYSE:) in Europe.
“You want to do the right thing for the environment, but it feels like you’re setting yourself up for a very expensive investment that will make your life that bit more complicated,” Garcia, a 29-year-old corporate media director, said.
“We’ll probably get a hybrid first”.
FALLING BEHIND
Critics have long warned that a lack of affordable EVs would eventually stall the steep sales growth boosted by early adopters and corporate fleets.
A weaker performance in September, consumer sentiment surveys and bleak commentary from carmakers and dealers indicates that low growth era may have arrived.
U.S. automakers, though further behind on the transition to EVs, are also feeling the pinch. Ford (NYSE:) and GM warned recently they were delaying the launch of cheaper EV models and pulling back on spending due to weaker demand and higher costs in the wake of new United Auto Worker contracts.
But the problem is cyclical.
Demand will remain slow for as long as there are no cheaper EVs available, Felipe Munoz of JATO Dynamics said of the slowdown in sales in Europe in September.
“From a regulatory standpoint, they don’t have to push product out right now – they can afford to focus on profitability,” said Alistair Bedwell, head of powertrain forecasting at GlobalData.
“But they need to have an eye on Tesla and the Chinese brands, because they don’t want to get too far behind.”
Intention to buy an EV has stayed constant in Germany over the past year, a poll by consumer research firm The Langston Co showed – meaning that although the number of EVs being sold is rising, the number of people wanting to buy an EV is not.
Growing sales may simply be a sign that carmakers who were struggling to produce EVs because of supply chain bottlenecks can finally meet backed up orders, rather than a sign of rising demand, said The Langston Co’s insights manager Ben DuCharme.
Philip Nothard, insight director at dealer services firm Cox Automotive, said low residual values also put buyers off as companies and many consumers choose new cars based on what they can sell them for a few years down the line.
“We call it the valley of death, which we will be going through in 2024 to 2027: low residual values, high supply, and low demand,” Nothard added.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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