EV Index 2023 Q3: a chasm still to be crossed

Overview

The factors encouraging the adoption of electric vehicles by European consumers showed continuing steady improvement during the third quarter of the year. Amongst the larger Big 5 car markets, Germany experienced a growth spurt with its Index improving by a solid ten points. Here infrastructure gains made the biggest contribution with an apparent knock on effect of boosted consumer confidence leading to increased research activity around electric cars.

EV Index 2023 Q3

Figures in brackets show change from Q2

A three-tier Europe is becoming more evident. The EV Index for the larger northern markets—Germany, France and the UK—shows appreciable if unspectacular growth over time, placing them in the middle tier.

Norway and the Netherlands remain the top-tier outliers with high levels of consumer acceptance backed by investment and government subsidies positively encouraging EV purchase.

But again during the most recent quarter, Italy and Spain fell further behind in their comparative rankings. Poor charging infrastructure remains the most significant negative in these markets and whilst there have been some small incremental additions to the charger networks in both countries, they still lag a long way behind their northern neighbours. As well as charge point availability being a barrier, charging costs themselves have also been highlighted as another factor discouraging EV acquisition. Spain has been identified as the European country with the most expensive EV charging costs, 130% higher than in next door Portugal.

The latest sales figures in Europe are a reminder of the chasm that has still to be crossed for electric cars to achieve mass acceptance. In September, EV registrations in the EU achieved 14.8% market share, once again overtaking diesel cars, but still only a small, 0.7% improvement over their share one year ago.

Vehicle pricing remains an intransigent challenge in all of the Big 5 markets. Even in Germany where EV prices are the most competitive, a buyer is still paying a premium, on average, of 56% when opting for an EV. The long promised appearance of ‘budget’ EVs has yet to materialise.

Whilst the Chinese brands entering the European market over the last year have begun to establish some presence, they have not altered significantly the price differential between ICE and EV as had been expected. Two factors are at play here. Firstly, the higher margins these brands have been able to enjoy as the market still recovers from Covid-induced supply side shortages has delayed any such move on their part—a case of them making hay whilst the sun continues to shine. Secondly, their fearfulness of inciting retaliatory action from national and regional governments is perhaps an even stronger factor. The European Commission’s decision to launch an investigation into the government subsidies received by Chinese car manufacturers—a probe which is expected to take nearly a year to complete—will further dampen any likelihood of these brands initiating a price war that would strengthen the developing protectionist mindset amongst European legislators.

More broadly on the policy front, the third quarter of 2023 was characterised by a great deal of confusion as well as contradictory actions from different national administrations.

In September, the UK government announced it was delaying the phasing out of the sale of ICE vehicles from 2030, the original target date, to 2035. This move provoked anger not just from environmental bodies, but car industry figures as well, with the chair of Ford UK, Lisa Brankin, particularly scathing: “Our business needs three things from the U.K. government: ambition, commitment and consistency. A relaxation of 2030 would undermine all three.”

Other European governments still seeking to positively encourage the adoption of EVs continue to act in a piecemeal way, with no common view apparent of what is effective in achieving that end. All too often these initiatives become intertwined with other policy objectives. Both Italy and France, for example, are reviewing their EV subsidies to favour national manufacturers, blurring EV transition initiatives with industrial policy. In June, the Spanish government extended tax breaks for EV purchase, an action seemingly motivated as much by the proximity of a snap general election, as by a strategic understanding of how best to encourage EV adoption. In Germany, debates around the banning of fossil-fueled cars and wider environmental initiatives continue to be a political football and a source of growing tension within the ruling three-party coalition.

The EV Index from Sophus3 provides an objective measure of the readiness of the vehicle market to enable and encourage the mainstream adoption of electric vehicles (EVs).

The index is formed from three pillars, each measuring distinct factors that help or hinder electric vehicle acquisition. First of these is the consumer appetite to buy electric, the second is the capability of the automotive companies to supply these cars, and the third is the availability of suitable charging infrastructure.

A score of 100 represents parity in the attractiveness, availability, pricing and usability of an electric car compared with a conventionally fuelled vehicle.

We publish the EV Index for the UK, Germany, France, Italy, Spain, The Netherlands, and Norway.

A fuller explanation of the EV Index from Sophus3, and links to previous issues, can be found here.