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Tough times for EV parts makers in Europe

Poor performance by European automakers suggests the transition to all-electric vehicles may take longer than expected, Euronews says

Nov 2, 2024 16:55 75

Tough times for EV parts makers in Europe  - 1

Dark clouds are gathering over the sector related to the production of elements and parts for electric vehicles. This is also evident from the headlines in many media in recent weeks: "Audi" closes its production at the electric car factory in Brussels in February next year", "Project for a battery recycling plant in France is suspended", "Germany stops a large-scale project to build a chip factory", "The concern "Mercedes- Benz" sold over a third fewer EVs in the third quarter, "A subsidiary of "Northvolt" is facing bankruptcy after stopping a project".

Is China to blame?

The automotive sector in Europe is facing a crisis. Instead of growing, the EV market is seeing sales decline amid declining demand and increasing competition from China-based car companies.

Against this background, the European Union this week imposed additional tariffs on imports of electric vehicles made in China.

The new tariffs, of up to 35.3 percent, are set to be added to the standard tariffs on imports of Chinese electric vehicles, which are 10 percent, Reuters reported.

On June 12, the European Commission proposed the imposition of the additional tariffs amid an investigation that began in September 2023. It is related to the huge subsidies the Beijing government gives to Chinese electric vehicle manufacturers.

The temporary trade defense measures are necessary because Chinese companies are in a more privileged position than their competitors, benefiting from illegal state subsidies, the European Commission said at the time.

Crisis in the electric car market in the EU

Despite subsidies for the purchase of electric cars adopted in some EU countries, their sales are collapsing and the European car market is in crisis, market analysts say.

In August 2024, 43.9 percent fewer new battery-powered cars (BEVs) were registered in the European Union (92,627), compared to 165,204 in the same month last year.< /p>

A serious collapse in sales of new electric cars powered entirely by batteries was reported in Germany (-68.8 percent) and in France (-33.1 percent). These are the largest markets for this type of car in the European Union, ACEA points out.

The situation improves slightly in September 2024, when the share of newly registered electric cars in the EU powered entirely by batteries rises to 17.3 percent of all new cars. In September 2023, this share is smaller - 14.8 percent.

However, the number of new electric cars that were bought last month decreased by 5.8 percent. This is according to the data of the European Association of Automobile Manufacturers (ACEA), published on its website at the end of October.

The drop in sales of new plug-in hybrid (PHEV) cars in EU countries is also significant. In September 2024, 22.3 percent fewer cars of this class were registered compared to the same month of 2023.

European manufacturers with declining electric car sales

Major automakers report slowing demand for electric vehicles until 2030. This is due to some extent to the high prices of most models and the slow construction of a network of charging points for car batteries, according to Reuters.

The "Audi" (Audi) announced this week that the German car company's plant near the Belgian capital Brussels will be closed on February 28, 2025, Politico reported.

Negotiations are still ongoing with a potential buyer of the enterprise, the main managers of "Audi" said.

The reason for the closure of the factory is the significant decline in the demand for luxury electric cars in the European market and the problems faced by the German automotive group "Volkswagen" (Volkswagen Group). "Audi" is its subdivision.

Meanwhile, the union leader of the employees at "Volkswagen" Daniela Cavallo announced that the concern plans to close at least three factories and tens of thousands of jobs in Germany.

The difficult situation in which the concern finds itself is also visible from its financial report for the third quarter of the year, presented on October 30.

"Volkswagen" reported a 42 percent drop in profit compared to the same quarter of 2023. This is its lowest level in three years.

The concern sold 6.5 million vehicles in the first nine months of the year. This means that sales of "Volkswagen" fall by about 300,000 vehicles compared to the same period in 2023, the company's website says.

In Western Europe, sales fell by 1 percent.

Europe's car market has been shrinking since the coronavirus pandemic, with around 2,000,000 fewer vehicles being sold, according to Reuters.

Another German car concern - "Mercedes-Benz" (Mercedes-Benz), reported a sharp third-quarter drop in operating profit at its car division. This comes amid a collapse in sales of all-electric vehicles in the third quarter, down 31 percent from the same period in 2023.

"Demand in Europe for fully battery-powered electric cars is at much lower levels than expected by the industry," says the chief financial officer of "Mercedes-Benz" Harald Wilhelm, quoted by "Financial Times".

The automotive company "Stelantis" (Stellantis) also reported a decline in its sales. It placed on world markets in the third quarter approximately one fifth fewer cars (1.15 million cars) than in the same period of 2023. This is indicated by the preliminary estimates of the Amsterdam-based multinational corporation, announced in mid-October and quoted by DPA.

Among the car brands that "Stelantis" owns, are "Opel" (Opel), "Peugeot" (Peugeot), "Alfa Romeo" (Alfa Romeo), "Citroen" (Citroen), "Dodge" (Dodge), "Jeep" (Jeep), "Maserati" (Maserati) and others.

For its part, the Swedish car manufacturer "Volvo cars" (Volvo Cars) announced in September that it was abandoning its ambition to sell all-electric cars by 2030. "Volvo Cars" is a division of the Chinese concern "Geely" (Geely).

The decline in sales of new electric cars in the European Union also negatively affects the production of elements and parts that are key to their creation. In recent weeks, it has been reported that projects for the production of batteries for electric cars, as well as chips for the computer systems of cars, have been suspended or frozen.

They are stopping a project for a large semiconductor plant

German authorities announced at the end of October that they were suspending a project to build a large semiconductor plant worth about 2.7 billion euros. This is another example of the crisis in the car chip sector, says France Presse.

The project led by the American semiconductor manufacturer "Wolfspeed" (Wolfspeed) and the German automotive supplier ZF, was to be implemented in the province of Saarland, near the border with France.

"The project is not abandoned, but "Wulfspeed" postpones the investment indefinitely depending on the development of the market situation," announced the Prime Minister of the Saarland Regional Government, Anke Rellinger.

"Wulfspeed" in partnership with Cet Ef, announced in February 2023 that it wanted to build "the largest plant in the world" for new generation silicon carbide semiconductors.

Slowing demand for electric cars is stalling projects in the chip sector that are key to their production. The whole of Europe is facing this problem, but it is particularly pronounced in Germany, where sales have stagnated.

"Intel" abandons chip plant in Germany

In September, the American company "Intel" (Intel) also abandoned construction of a chip plant in Germany. The reason for this decision is the weak demand for semiconductors related to the decline in the electric car market, analysts note.

The project has been stopped, although the German government has promised to subsidize it with around 10 billion euros.

This reversal also blocks the ambitions of the European Union, which is trying to capture 20 percent of the global semiconductor market by 2030. The sector is dominated by Asian producers, market analysts note.

Subsidiary of "Northvolt" is threatened with bankruptcy

Subsidiary company of the Swedish battery manufacturer "Northvolt" (Northvolt) has filed for bankruptcy protection after canceling a project it was working on. This is indicated by court documents to which the Reuters agency has gained access.

The company "EtExpansion AB" (EttExpansion AB), a division of "Northvolt", has accumulated debts estimated at between SEK 2 billion and SEK 3 billion (between USD 194 million and USD 290 million). This is stated by the court-appointed trustee to the business publication "Dagens Industries".

"EtExpansion AB" was responsible for increasing the production capacity of the "Northvolt" for batteries for electric cars. However, the corporation's board canceled the project in September.

"This is a necessary step, as further investment (in the project - note ed.) would put the financial basis of "Northvolt" at risk, a spokesman for the corporation said in a message sent to Reuters.

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A project for a plant to recycle batteries for electric cars is halted

The French mining company "Eramet" (Eramet) announced in October that it was ending its project to build a plant to recycle batteries for electric cars in northern France. The reason for this decision is the too slow development of the European market for electric vehicles, according to France Press.

The weak results of European car manufacturers show that the transition to all-electric vehicles may take longer than expected, says "Euronews".

The situation on the electric car market in the European Union calls into question the ambitious goals of Brussels to end the sale of new diesel and gasoline cars in EU countries by 2035, analysts note.