European Car Sales Decline in March Amid Persisting Weakness in Electric Vehicle Segment
In March, the European car sales market witnessed a significant decline in passenger car sales, amounting to a 2.8% drop, signalling weaker demand across the continent, particularly for electric vehicles (EVs). According to the European Automobile Manufacturers’ Association, new-vehicle registrations dwindled to 1.38 million units during the month. Notably, sales of battery-powered cars experienced a sharp 11% decline, with countries like Germany, Sweden, and Norway recording cooling demand in this segment.
This downturn, attributed in part to the timing of Easter, marks the second decline in four months, highlighting the mounting pressure on automakers amidst various challenges. Factors contributing to this downturn include higher interest rates, sluggish economic growth, and the gradual phasing out of government subsidies aimed at stimulating EV demand. Notable automotive giants such as Volkswagen, Mercedes-Benz, and Tesla reported lower EV sales in the first quarter of the year, further exacerbating the situation.
Consequently, some traditional automakers are reconsidering their strategies for phasing out combustion engines, while others have revised their EV targets. Mercedes-Benz Group AG, for instance, recently adjusted its sales forecast, anticipating that battery-powered vehicles will comprise less than half of its sales for a longer duration than previously anticipated.
The repercussions of this slowdown have been most pronounced at Tesla, which announced plans to reduce its global workforce by more than 10% in response to the challenging market conditions.
Italy witnessed a staggering 34% decline in EV sales last month as consumers held off on purchases in anticipation of potential new subsidies under government consideration. Similarly, Germany saw a notable 29% drop in EV sales, prompting manufacturers like Volkswagen to introduce their own rebates to offset the reduction in government aid.
While some new electric models gained traction in markets such as France and the UK, inadequate charging infrastructure continues to hinder more widespread adoption of EVs across Europe.
Interestingly, amidst the decline in pure EV sales, there has been a slight uptick in the demand for plug-in hybrid vehicles, which rose by 0.7% last month. This trend indicates a shift in consumer preference towards models featuring both a battery and a combustion engine. Conversely, sales of petrol cars in the region declined by 8%, while diesel car registrations plummeted by as much as 18%.
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