Switching To EVs: Road Bumps Ahead Of European Automakers

European automakers have been making continuous investments to develop electric vehicles (EV), expected to dominate the auto industry in the future. This comes after the sales dip of diesel-powered cars in the continent for which, huge investments were also made for developing the technology.

However, the transition toward EVs may not be very easy in the European market due to several reasons. Persistently very low demand for EVs, lack of availability of charging stations and yet not so-profitable business model are coming in the way of EVs in the short term.

Many European companies are committed to offer new EVs and hybrids within a decade. Volkswagen (DE:VOWG_p) AG (OTC:VLKAY) would be rolling out 80 new electric car models by 2025, while in the same time frame BMW AG BAMXF has plans to launch 25 new electric and hybrid cars. Peugeot SA (OTC:PUGOY) intends to unveil seven plug-in hybrid and five all-electric vehicles between 2019 and 2021. Also, Daimler AG (OTC:DDAIF) aims to introduce an electric version of every existing in-house model by 2022.

Per a poll conducted by Wall Street Journal, European auto manufacturers believe that the demand for EV is too minimal and this is a hindrance to its replacement with EVs at least in the short run. Naturally, European automakers can’t stop production of diesel-powered vehicles downright as a huge demand for this category of vehicles still exists in the market.

Notably, companies aren’t sure whether they will be able to generate profits soon enough by selling EVs. Recently, Daimler worried that sale of electric cars might hamper their margin goals. It further anticipates a drop in the margin earnings to half compared with selling of vehicles with combustion engines.

To offset this lower profitability and curtail expenses, auto companies are resorting to outsourcing their component manufacturing.

However, high car prices, inadequate charging stations and the inability to travel long distances make EVs, a less-preferred option by the customers at present.

Current Scenario for Combustion Engines

Demand for diesel-cars in the continent declined after Volkswagen was caught manipulating emission tests in 2015. In several countries including Germany, banning of diesel cars by the government has scared consumers. LMC Automotive, a research group quotes that the market share of diesel cars plummeted to approximately 45% in 2017 from 53% before the emission scandal.

Another reason for this decline in diesel car sales is sparse availability of newer models. Over the last few years, automakers have been putting their money into technologies to develop EVs to seize the future market. In a highly diesel-car dependent country i.e. Germany, automakers are trying to defend cars of that category in order to help meet climatic goals set by the European Union. Significantly, diesel-cars produce less greenhouse-gas emissions in comparison to gasoline-cars.

Additionally, auto manufacturers have been investing quite a lot to improvise combustion engine software of diesel cars to make them cleaner. Also, offering cash incentives to customers replacing old diesel cars with the new ones is another option that automakers are looking into.

To meet the growing demand, automakers have also been contemplating to increase production of gasoline cars.

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