Registrations of battery electric vehicles and hybrid passenger cars in the EU have continued to grow strongly during the third quarter, although they still make up a small fraction of the market.
IHS Markit perspective
- Significance: Registrations of BEVs and hybrid passenger cars in the EU have continued to grow strongly during the third quarter, according to the latest data published by ACEA.
- Implications: The increase in electrification is large in percentage terms, but remains a fraction of the overall passenger car volumes.
- Outlook: The EU passenger car market is on course to hit IHS Markit's forecast for plug-in vehicle share during 2017 of around 1.4% y/y, with further rises expected to meet forthcoming fleet CO2 targets in 2021.
Registrations of electrified passenger cars in Europe have continued to see strong momentum during the third quarter of 2017, according to the latest data published by the European Automobile Manufacturers' Association (ACEA). Gains have come across the full range of categories including battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). The trade association has said that combined sales of these types of vehicles – which it calls "electric chargeable vehicles" – increased in the European Union (EU) by 55.3% year on year (y/y) between July and September to 55,813 units. This has helped further boost the region's performance in the year to date (YTD), which has now grown by 43.6% y/y to 152,694 units. Furthermore, the European Free Trade Agreement (EFTA) region has risen 38.6% y/y during the third quarter to 17,978 units, while in the YTD, volumes reached 48,663 units thanks to a gain of 27.8% y/y.
By type, BEVs have risen in the third quarter by 60.9% y/y to 23,841 units in the EU, which contributed to sales of 70,541 units in the YTD, a gain of 53.1% y/y. During the quarter, the biggest market for these types of vehicle was Germany with 6,244 registered, which was also an increase of 88.0% y/y , as it has been underpinned by the government incentives that were introduced during the first half of 2016. France was the second largest market for such vehicles, with registrations of 5,208 units, a gain of 38.8% y/y, also through incentives. However, it remained the market leader in the YTD with 18,763 units, although it gained by just 16.6% y/y. Gains were recorded across much of the rest of the EU, with Spain and Netherlands seeing triple-digit percentage jumps. However, the UK saw a relatively modest gain of 20.9% y/y, despite incentives, potentially not helped by the weakening in the passenger car market locally. Denmark declined further in the quarter, compounding the retreat in the year to date (YTD). Although a further increase in registration fees has been deferred for a limited number of vehicles and deductions based on battery capacity announced, a public debate over vehicle taxation during August and September is likely to have stalled registrations.
In the EFTA region, registrations of BEVs have grown by 45.3% y/y to 9,571 units during the quarter, which helped the YTD to expand by 32.8% y/y to 26,381 units. This bloc is heavily influenced by Norway and its generous incentives, with demand expanding by 47.2% y/y during the third quarter.
PHEVs have also grown strongly during the third quarter of 2017, expanding in the EU by 53.2% y/y to 31,000 units. This has contributed to an increase in the YTD of 36.4% y/y to 79,409 units. Germany has again been a centre of growth thanks not only to incentives, but also the growing availability of this technology from domestic OEMs. Registrations here have jumped from 3,274 units to 8,152 units. However, the market leader in the region this quarter is the United Kingdom with registrations of 8,934 units, an increase of 42.6% y/y, despite a change in vehicle excise duty (VED) at the beginning of the second quarter. Double digit percentage gains have also been recorded by Sweden, France and Belgium.
In the EFTA region, PHEVs have risen by 48% y/y during the third quarter with 7,411 registrations, with the rate of growth in the YTD now standing at 39.8% y/y to 19,350 units. These rates of growth have both been driven by the Norwegian market.
Elsewhere, hybrid electric vehicles – this category comprises both full and mild hybrids – has had a strong third quarter and YTD in the EU. Growth in the quarter stood at 59.7% y/y to 110,778 units, with registration volumes in the YTD hitting 324,678 units, a gain of 60.6% y/y. Key growth markets for this technology include the top five largest passenger car markets in this region as it becomes increasingly widespread.
As for the other alternative fuel vehicles (AFV), including natural gas vehicles (NGV), liquid petroleum gas (LPG) and ethanol (E85), gains have been relatively small compared to vehicles featuring electrification. Registrations in the EU have increased by 30.6% y/y during the quarter to 45,044 units, while in the YTD registrations are up by 13.0% y/y to 151,856 units. Italy has the lion's share of registrations in this area with 75% of the market in the quarter, thanks to the popularity of LPG and CNG. However, there has been more pronounced growth in other markets, notably Sweden, Spain and Belgium.
Outlook and implications
The latest data again show impressive percentage growth numbers for electrified vehicles – and the wider alternative powertrain space – compared to the gains recorded by the passenger car market as a whole. However, in real terms, demand remains very modest against a total EU passenger car volume in the first three quarters of 2017 of 11.66 million units, an increase of 3.7% y/y. Plug-in type vehicles made up just 1.3% of the market during the YTD, of which BEVs made up 0.6%. The proportion of these types of vehicles sold in EFTA is far greater, with of 366,073 passenger cars registered; 13.3% of these are plug-ins and 7.2% BEVs alone. This is mainly down to the "Norway effect", with the significant subsidies available in the market and the affluence of consumers having massive influence on market demand. However, it is not as if key markets in the EU are not offering incentives to lift market demand, with the UK, Germany and France all giving customers some support to make the switch, while other smaller markets are also giving support now. Also, we are seeing the widest offering of this type of technology than ever before, and more are set to come as automakers make efforts to meet new regulatory and self-imposed targets.
The increase may also be being supported by a shift from diesel; there has been a backlash against the fuel in many markets in Europe. However, as can be seen from the first-half fuel-type numbers published by ACEA, much of the movement is from diesel to gasoline (petrol), a move that had already been anticipated due to the stiffening emissions standards and the space and cost of the technology required for diesel to meet them, making it especially prohibitive for smaller, cheaper cars.
With plug-in vehicle sales expected by IHS Markit to achieve a share of 1.4% in the EU during 2017, this is expected to continue growing over the next few years. By 2020, we expect plug-in vehicles to account for 4.8% of the market, rising to 6.4% during 2021 as the technology becomes more common and there is pressure for OEMs to meet the fleet CO2 targets. However, the next phase of these targets looks set to be even stiffer according to a recent proposal put forward by the European Commission, with a 30% reduction by 2030 and an interim fall of 15% by 2025. Although the interim target has been welcomed by ACEA, it has noted that that four years between the current target and the interim target "does not leave enough time to make the necessary technical and design changes to vehicles." It also believes the 2030 target is "overly challenging, going beyond the ambition level set out in the Climate and Energy Framework and in its own 2016 impact assessment, which specifies what is needed to deliver on COP21. In line with this, the European auto industry considers a 20% reduction by 2030 for cars to be achievable at a high, but acceptable, cost." ACEA Secretary General Erik Jonnaert also stated, "A radical change in the market for alternatively-powered vehicles will of course not happen overnight. This is why focusing on a 2030 target is the best way forward. Instead of setting an interim target in 2025, it should rather be seen as a milestone year to review the progress made in reducing CO2 emissions towards 2030."
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