Electric vehicle sales in July 2024 totalled 853,000 globally, increasing by just 6% year-on-year, a tepid performance that highlights weaker-than-expected demand for battery-powered models and raises doubts about the sector’s ability to sustain its growth momentum.

What’s even more worrying is the underperformance of European carmakers, with several key brands such as Stellantis, Volkswagen, and Mercedes-Benz seeing significant losses in market share, according to the latest Bank of America’s EV Tracker report.

In contrast, sales of plug-in hybrid electric vehicles surged by 58% year-on-year, driven primarily by China’s strong demand.

This shift towards plug-in hybrids may reflect consumers’ concerns over the range limitations of fully electric vehicles and the higher total cost of ownership associated with battery electric models, particularly in Europe.

European automakers struggle to keep pace in global EV market

European carmakers are struggling to keep pace with the competition, particularly in the battery electric vehicle segment, as Bank of America data showed.

Stellantis’ market share dropped to 2.7% in July, a sharp decline from 3.6% in the second quarter of 2023 and 4.0% a year earlier.

Volkswagen Group’s market share fell to 6.6%, down from 7.5% in the second quarter of 2023, while Mercedes-Benz, traditionally a leader in the luxury segment, saw its market share tumble to just 1.9%, down from 2.5% a year prior.

“Electric vehicle sales in Germany suffer currently from a very high comparison base from a year ago, when purchase subsidies for company cars expired in September 2023,” Bank of America analysts noted.

The global electric vehicle market continues to grow, but the weak performance of European car makers and the rise of plug-in hybrid electric vehicles indicate that the transition to fully electric vehicles could take longer than expected.

BMW defies the trend

Despite the broader challenges facing European carmakers, BMW has managed to buck the trend, reporting significant growth in its battery electric vehicle market share.

BMW’s electric vehicle sales soared by 40% year-on-year in July 2024, pushing its market share to 4.6%, up from 3.7% in the second quarter of 2023.

“The i4 and iX1 keep selling very well and the recently launched i5 is contributing meaningfully to the annual growth rate,” analysts wrote.

Unlike many of its competitors, BMW’s decision to prioritise battery electric vehicles over plug-in hybrids appears to be paying off.

BYD surpasses Tesla, but shifts to plug-in hybrid

Chinese automaker BYD boosted its market share from 14.7% in the second quarter of 2023 to 17.2% in July 2024, solidifying its position as a global electric vehicle leader and dethroning Tesla.

However, while BYD’s battery electric vehicle sales in China fell by 7%, its global plug-in hybrid sales surged by an impressive 62% year-on-year.

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Tesla’s global battery electric vehicle market share fell to 14.0%, down from 19.4% in the second quarter of 2023. The decline was especially pronounced in Europe, where Tesla’s electric vehicle sales dropped by 5% in July.

This dip is partly attributed to higher prices for the Model 3, driven by import tariffs on vehicles manufactured in China.

Higher costs hold back battery electric vehicle adoption in Europe

One of the key reasons for the sluggish growth of battery electric vehicles in Europe is the higher total cost of ownership compared to internal combustion engine vehicles, according to Bank of America.

While battery electric vehicles generally offer lower running costs, high purchase prices and significant depreciation have deterred wider adoption.

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In Germany, which serves as a key indicator for the European market, battery electric vehicle prices remain around 20% higher than their internal combustion engine counterparts, even after accounting for subsidies and rebates.

Analysts have noted that European consumers are hesitant to make the switch to battery electric vehicles due to the high upfront costs and concerns over residual values.

“Battery electric-vehicle prices need to come down in order to trigger a sales boom regardless of regulation,” Bank of America analysts noted.

Outlook: European electric vehicle sales forecast revised downwards

Looking ahead, Bank of America has revised its forecast for European battery electric vehicle sales downward, predicting a 2% year-on-year decline in 2024.

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The European Union’s ambitious emissions targets, including a complete ban on new internal combustion engine vehicle sales by 2035, are set to profoundly shape the future of the automotive market.

While regulatory pressures, particularly around carbon dioxide emissions, will continue to push car makers towards electrification, the higher total cost of ownership associated with battery electric vehicles remains a significant obstacle to widespread adoption in Europe.