In March, the German electric vehicle (EV) market grappled with the repercussions of the sudden withdrawal of government incentives for electric vehicles at the end of December, resulting in a noticeable decline in plug-in electric vehicle (EV) market share, down year-over-year to 18.0%. Battery electric vehicles (BEVs) suffered a substantial drop of 29% in volume compared to last year, and plug-in hybrid electric vehicles (PHEVs) experienced a 4.5% decrease. Total automotive sales dropped to 263,844 units, which reflects a 6% year-on-year decline and is significantly lower by 25% from the 2017-2019 seasonal averages. The Tesla Model Y emerged as the top-selling BEV during this period.
Market Share Dynamics
The breakdown in EV market share indicates a dip with BEVs at 11.9% and PHEVs at 6.1%, juxtaposed with previous year figures reflecting higher percentages, shining a light on the challenges facing the sector. The cessation of incentives, particularly pronounced for BEVs, has played a crucial role—especially considering the substantive support they formerly enjoyed for vehicles under €65,000. The sudden policy shift has jarred market dynamics and buyer perceptions of BEVs, causing a stark downturn in their sales.
Underlying Influences on BEV Sales
BEV sales are significantly impacted by the disappearance of incentives that were in place through December, presenting the worst year-on-year volume drop in four years. To add to the complexity, logistics issues, such as delivery delays through the Red Sea impacting Tesla shipments to Europe, contributed to the slowdown. Moreover, Germany’s recession since the third quarter of the previous year, along with the relatively high prices of mid-category BEVs in comparison to internal combustion engine (ICE) vehicles, have led consumers to tighten their belts.
Considering the higher price points of entry-level BEVs vis-à-vis their ICE counterparts, buyers are disincentivized to make a switch, especially during a recession. An example is the Fiat 500 BEV, with a substantially higher manufacturer’s suggested retail price (MSRP) than its ICE variant. The elimination of incentives has disproportionately impacted less expensive BEV models, leading to a considerable slump in their sales.
BEV Model Performance in March
The Tesla Model Y continued to command the German BEV market, followed by the Volkswagen ID.4/ID.5 and the Cupra Born. Among new entrants, models like the Renault Scenic emerged, and existing ones like the BMW iX2 and Audi Q6 e-tron saw escalating sales. On the other hand, several popular BEVs witnessed more than a 50% plunge in sales year-on-year, a trend less pronounced among premium and upper-segment models that are already competitively priced compared to their ICE alternatives.
Insights on Market Share and Outlook
While sales of combustion-only powertrains slightly declined, they still performed better than BEVs, with their market share increasing slightly year-on-year. In contrast to median consumers, premium brand buyers with more robust financial standings seem less affected by economic downturns, reflecting in the positive year-on-year growth for several premium BEV models from domestic brands.
Despite the downturn, the Volkswagen Group remains ahead in the German market over Tesla. Rivals Mercedes and BMW groups have surpassed market performance, with their volumes rising compared to the previous year. However, the overarching theme is clear: If BEVs were priced more competitively, particularly in the higher volume and economy segments, they would likely perform better in terms of market share.
Looking forward, Germany’s recessionary climate, high inflation rates, and flat interest rates combined with overpriced BEVs in the lower to mid-price segment are leading to shrinking overall BEV sales volumes and market share, while European automakers enjoy record profit margins.
