The European market pushed away from the bottom but not all, but only a car segment, and so far only on paper. An alarming but interesting wake-up call was the problems faced by electric vehicles. They result at the same time from crisis in an automobile industry, problems of power industry, fluc-tuations of the market of oil and persistently rising in price lithium.

Electric vehicles today are the crossroads of a host of industries, many of which are in crisis. Electric vehicles are the perfect occa-sion to talk about cross-fuel competition, metal prices, the auto industry and even European Union energy innovations.

The first half of the current year brought invaluable information on the course of big fuel experiment in which the largest economies of the world were involved. And Europe became the most interesting to us by a field where this experiment passes. After all it possesses the biggest share of electric transport in structure of sales. And it was this region that was hit harder than other industrialized regions by the global energy crisis.

C like crisis

According to the CEO of the European association of car makers (ACEA) Sigrid de Vris, the Euro-pean automotive industry heads transition to «mobility with zero level of emissions», and the best confirmation of this fact is doubling of a share of the market of «pure» electric cars — almost to 10%. It is necessary to recognize the obvious growth of indicators. But a small precipitate remains from the fact that the fall of the European car market plays well with the electric segment.

Last year we already noted the outlined recession in the European market of vehicles. Sales fell off in July, 2021 when the number of new registration decreased at once by 23.2% (to 0.824 million). Further crisis started being untwisted: two-digit decrease in sales was shown by both the periphery, and the largest automobile markets of the European Union (Germany, Spain, Italy and France). Re-cession did not avoid Great Britain also, having updated anti-records of the end of the 1990s.

Following the results of 2021 the European market kept at the expense of excellent indicators of the first six months — the statistics was positive. However, the gain was quite modest. According to OI-CA, in 2020 on car markets of the European Union, Great Britain and the countries of the European Association of Free Trade 14.08 million units and in 2021 – 14.13 million were realized. Of course, data of this sort demand a context, a reference point to understand, success before us or a failure. 2019 when in the European market 18.42 million vehicles were realized will give a necessary refer-ence point to us. Thus, growth of 2021 was only the beginning of new falling which proceeded in the current year.

And if to address to data only on the European Union, the collapse will be even more obvious. In 2020 9.94 million cars and in 2021 – 9.7 million were realized.

But wait. Perhaps, we mislead our readers, after all, according to ACEA, in August falling stopped, growth began. The association reports literally the following: «In August the European market of new cars, at last, returned to growth (+4.4%), having put an end to 13 months of consecutive reces-sion». However it is about increase in sales in August, 2022 (650.29 thousand) in comparison with August of 2021 (622.79 thousand). But it is worth carrying out comparison with the next months, we will see that falling did not stop at all, and safely proceeds. So, in July of the current year 738.2 thousand cars were sold. Moreover, result of August — the worst for the first eight months of this year.

A sign of good taste

The current situation with August take-off of sales, improbable on scales, does not cause optimism in the European car makers. They expect that the EU automobile market in 2022 will be reduced more than by 25% in comparison with pre-pandemic levels. Actually, this is transparently hinted at by the results of the first eight months, when about 6 million passenger cars were sold – a decrease of 11.9% compared to the same period last year.

Continuous frustration is brought by the EU main markets: in Italy falling for 18.4%, in France — for 13.8%, in Germany — for 9.8%, in Spain — for 9.4%. Here too it is worth setting a context: for the first eight months of last year these markets showed essential growth (Italy — for 30.9%, France — for 12.8%, Spain — for 12.1%, Germany — for 2.5%).
Registration of commercial vehicles in the European Union fell at all and in July (for 17.4%), and in August (for 8%). Here it is impossible even to try to make a good mine at bad game.
Falling of the market is not simply important but extremely urgent signal of a condition of the Euro-pean economy. It is besides interesting to track as the rhetoric concerning the nature of the inflaming crisis in the EU changed.

The crisis of semiconductors which arose because of a combination of factors became the first and main reason of falling of sales of motor transport worldwide: pandemic consequences (ruptures of logistic chains, decrease in outputs, etc.), the trade conflict between the USA and China, boom of mining of crypto currencies. Not only car market suffered from this crisis but also producers of com-puter accessories, game devices, smartphones, etc.

It is really important factor. The main thing is not to overestimate its value. The problem is that from the point of view of Europe it was the only thing influencing its car market. Of course, could the global energy crisis, which hit the welfare of EU citizens, have any impact? Did the global energy crisis create huge uncertainty in the EU market due to the fact that no one could predict how much gasoline would cost and how much electricity would cost? Besides the growing cost of one charging for anybody was not a secret. As was not a secret and an increase in prices for traditional motor fuel.

The matter is that in the European Union at some point began a sign of a good form to pretend as if there is no economic crisis. Therefore the thought is driven away that car sales can restrain from de-mand but not from the offer.

But there is one important circumstance which prevents us to believe simply as if the root of the problem of the European car market was covered in the limited offer, but not in the economic pres-sure reducing demand. And the circumstance is a situation in other large markets, first of all in Chi-na.

Fewer chips are necessary

Last year in the territory of the People’s Republic of China, according to OICA, over 26.27 million units of motor transport were realized. It is not only more than it was in 2020 (25.3 million) but even more than indicators of 2019 (25.8 million). By the way, if to consider the European markets more attentively, we will see that on the largest of them German sales following the results of last year fell off. So, in 2019 in Germany 4 million vehicles, in 2020 – 3.27 million and in 2021 – 2.97 million were realized.

If in Europe sales drop also in 2022, China in December of last year showed growth of indicators: realization of cars increased from 2.31 million in 2020 to 2.4 million in 2021. The same situation was observed also at the beginning of the current year.

Yes, there were also falling in the People’s Republic of China. The most considerable fell on April: sales were reduced from 1.69 million to 0.96 million. But the similar movements in the market were connected, most likely, only with anti-Covid measures. After mitigation of restrictions sale grew again: from 1.55 million to 2.19 in June, from 1.535 million to 2.14 million in July and from 1.54 mil-lion to 2.1 million in August.

If influence of a semiconductor factor was valid defining, hardly we would see similar indicators. After all, the mining boom started coming to naught only with the middle of summer. Surplus of the offer of video cards was already created and such companies as AMD, Apple and NVIDIA, ap-pealed to TSMC to reduce production of chips.

It seems, crisis of semiconductor production is overcome, and the European market continues to fall. Is it strange? No, it is not strange if not to try to accuse only semiconductors and to reflect on influ-ence on car markets of an economic crisis.

About the present in future time

In October, 2022 ACEA started guessing something. Earlier the association insisted that the market is limited only from the offer («deficiency of components limited outputs»). And now statements of the following character follow: «Demand can also suffer in the next months because of inflation and fears of recession». That is as of October, 2022 there are no problems with demand, they can only arise. For now this indicator shows a steady growth. Yes, growth is negative, but it is growth! Prob-ably, ACEA cannot simply recognize that citizens of the European Union have some problems. Therefore the organizations speak about pressing problems in future time.

In February of the current year the European association of car makers looked forward with opti-mism, hoping that crisis of semiconductors just about will settle and sales of cars in the European Union will start increasing. It was expected that in 2022 growth will make 7.9% and volumes of re-alization will rise from 9.7 million to 10.5 million. Even if this overly optimistic forecast had come to life, the result would have lagged behind the results of the year 2019 by 20%.

Now ACEA expects that sales volumes this year again will decrease — to 9.6 million units. It is 1% less than a last year’s indicator and is 26% less than an indicator of 2019. Probably, the association was too inspired by «growth» of August indicators. But what about those «fears of a recession»? Most likely, they need simply to be ignored. Otherwise, how can we explain that in the first eight months the decline was 11.9%, and by the end of the year a decrease of only 1% is expected?

Besides the forecast full of fervent optimism becomes at the beginning of the fourth quarter. That there was an improbable jump on a car market of Europe, the gain of indicators from September to December has to make 0.15 million units of rather average monthly indicators from January to Au-gust. Let us allow ourselves to doubt that such a thing is possible.

Also we will dare to assume that the European Union in general understands unsteadiness of opti-mistic forecasts. Therefore now it is required to increase stability of chains of deliveries of raw mate-rials and materials. Therefore, it is now necessary to increase the stability of the supply chains of raw materials and materials. That is it is necessary to fight against crisis in an automobile industry, surely stimulating growth of number of electric cars. There are problems with at the moment.

Only 16.66 thousand more

Last year became record for electric transport. Total growth of sales of electric cars made about 3.5 million units. Actually they almost doubled and reached 6.6 million. Thereof 3.4 million was sold in China, in Europe – 2.3 million and in the USA – 0.7 million. The Big three electric cars are the larg-est car markets in the world. But although the EU market is smaller than the American one, it occu-pies higher position in the electric segment.

Sales of electric cars grew also in the first quarter 2022. According to the International Power Agen-cy (IPA), for this period 2 million units were sold (about 75% more than for the similar period of 2021), thereof in the European Union – 423.25 thousand.

Thus, to the second quarter of 2022 the total of electric cars in the world reached 18.5 million units. It turned out that the electric segment demonstrates incredible vitality, resisting the blows of the global energy crisis, rising lithium prices and the rise in price of electric vehicles themselves. Appar-ently, our assumptions that economic problems will affect electric vehicles have not stood the test of time and the only segment that is shrinking in the European Union is the segment of traditional mo-tor fuels.

Let’s address to the data for the second quarter and we will see that sales of «pure» electric cars con-tinue to grow in the European Union — for 11.1% in comparison with the similar period of last year (to 233.4 thousand). The good gain was shown by Spain (plus 22%) and France (plus 18.6%). Of course, the decline in growth rates is somewhat discouraging. Indeed, in the first quarter, sales of «clean» electric vehicles in Spain increased by 110.3% and in France by a more modest, but still im-pressive 42.7%.

However, Italy continued to let everyone down. It and in the first quarter showed the depressing decline in demand for electric cars — for 14.9%. And in the second quarter this falling was accelerat-ed (minus 19.6%). But suddenly Germany also joined the falling Italy (minus 0.5%) and sales of the loaded hybrids also decreased by 12.5%.

Paradox but from four EU largest markets realization of this type of vehicles increased only in Spain (by 11.3%). However, Spain was one of the restrictions of the countries of 2020 which are most in-jured from the coronavirus, it could not be restored fully in 2021 therefore the sharp growth of indi-cators could be explained with effect of low base. But not it is important for us.
Yes, in absolute values of sale of electric cars of all types in the second quarter 2022 were higher than in the first quarter 2022, — on 16.66 thousand, on 16.66 thousand only. The difference on sales with the similar periods of last year speaks about delay of dynamics of growth of an electric segment which in the second half of the year risks to turn back falling.

Following the results of the first half of the year of sale of electric cars in the Old World increased by 9% in comparison with the similar period of last year and reached 1.1 million. But in this situation not only we, but also the western analysts note that sales lost dynamics.

It is possible to prevent falling only draconian restrictions against motor transport with the internal combustion engine (ICE). And the European Union works in this direction.

Final decision

In June, 2022 the European Parliament supported a total ban on sale of new cars with ICE in the ter-ritory of the European Union since 2035. The corresponding plan last year was presented by Europe-an Commission.

How significant would such a step be for the European Union? About 12.7 million citizens of the EU work in automotive industry, and, according to ACEA, 6.6% of all workplaces in the EU. Motor transport is €398.4 billion tax revenues of the governments of the key European markets. An auto-mobile industry turn is over 8%, and also it provides positive balance of trade balance (€76.3 billion) for the European Union.

Actually, vote of European Parliament against cars with ICE is only registration of a position on the forthcoming difficult negotiations with the countries of Europe. Within these negotiations the final decision of a motive question will also be made. And these intentions run counter to the current hid-den gasification of the European fleet. The process that we drew attention to in the period immedi-ately after the «diesel gate» continues. It consists in gradual leaving of the European consumers in a petrol segment, including under the guise of electrification of transport.

Gasoline still occupies the largest share in total sales and if to add to it the loaded and usual hybrids, it can appear that the gasoline share following the results of the first half of the year reaches not 37.9%, but 69.4%. Yes, there is a certain stretch at such calculations but not more than at attempts to carry hybrids to an electric segment.

As a result everything rests against the end user: how exactly it uses the loaded hybrid. And the cur-rent situation gives inconsistent signals to it.

Uneasiness and signals

The second half of last year and the beginning of the current spoke unambiguously against «pure» electric cars. Electricity was getting more expensive and with it the prices for public charging.
Then the spring of 2022 came, and gasoline began to rise in price uncontrollably after oil. And the more the countries of Europe stepped over a mark of $2 for gasoline liter, the more attractive electric cars became. Prospects of a wild and uncontrollable rise in price of fuel frightened consumers.

Some of the motorists just started saving, and those who had extra money and the desire to spend it on a car made a choice in favor of «clean» electric cars. Perhaps, this circumstance affected some re-duction of demand for the loaded hybrids which was observed in the first half of 2022. We will be able to check this reason after the publication of statistics at least for the third quarter, and it is better for all second half of the current year.

By the beginning of the third quarter oil started becoming cheaper, and after it the prices of motor fuel began to be reduced. For example, in Germany gasoline made a start from a ceiling in $2.15 for liter and directed down — to a mark of $1.7. However, at the beginning of September it approached a threshold in $2 for liter again. And at the beginning of October about $1.88 for liter were rolled away. A fervent price swing in such situation could only increase uneasiness and lead to decrease in demand. But at the same time the electricity continued to rise in price.

The European Commission beats down the prices

The electrical power problem was so essential that on September 14 the European Commission nev-ertheless deigned to provide on court of the European public the plan of an exit from an energy crisis which Euro Council demanded since October of last year.

The main clause is to reduce demand for the electric power. For a start it is necessary to reduce con-sumption at least by 5% in the chosen hours of peak demand (to reduce the average prices). And in general it is necessary to save; it is desirable to reduce general demand for the electric power at least by 10% till March 31, 2023.

Work in the necessary direction goes even without the leading role of European Commission. So, in the first half 2022 electricity consumption in the European Union was 1.2% less than for the similar period of last year, and in the third quarter — for 3.7%, besides the output of the electric power reached the minimum indicator since 2015. Dynamics is encouraging: it is quite possible to reach de-crease by 10% by method of natural burning out of the industry and purses of simple citizens.

The European Commission suggests redistributing the excess income of the energy sector to end us-ers. So, it suggests to establish the limit income at the level of €180 for 1 MW · h for all power plants (except gas), and the income exceeding a limit will gather the governments of EU member states and to be used for assistance to consumers of energy to lower their accounts.
The thought of redistribution of the income though was late, but is quite good itself. However, it is entered in a liberal market model which commitment is shown still by the European politicians. It will be interesting to look as redistribution of the income will work within this model.

The result of efforts of European Commission will be clear next winter. The measures offered by it are interesting to our subject to that they directly concern prices of electricity, declining scales a little towards electric cars. And also they indirectly confirm banal thought which for some political rea-sons is driven from themselves by the European officials: crisis came long ago and demands proper response.

Who will take the money?

Welfare of the population falls. Today this statement is fair for too large number of the countries. But in this case we speak about the European Union as a striking example of the electric car market.

At the moment the authorities of the EU fight not for growth of economy and for minimization of its falling under blows of the whole set of crises: covid, power, semiconductor and crisis of the pric-es of metals. All of them lead to an economic crisis.

As notes IPA, the major factor of development of an electric car segment is a continued political support. Last year the public expenditures on subsidies and other incentives for development of an electric car segment made nearly $30 billion. It is obvious that it investments which were made main-ly by the European Union, the United States and China. By the way, in 2022 IPA tries «to sell» elec-tric cars to Europe as means of fight against dependence on Russia. These are incredibly useful.

The more electric vehicles, the harder it is to subsidize their purchase and allocate other benefits. It is in this way offered to tax «inefficient cars with an internal combustion engine» by which it is neces-sary to finance electric car subsidies.

That is it is at the same time supposed that natural market processes will make electric cars more and more available, but natural market processes need to be helped, having taxed petrol and diesel transport. Besides electric cars are still 45-50% more expensive in Europe than the schoolmates in internal combustion engines: doubtful luxury as a means of transportation.

By a surprising coincidence, with the global energy crisis, the voices of those who claimed that the cost of owning an electric vehicle and a car with an internal combustion engine have either already equaled, or are about to equal. And the dates when the prices of electric vehicles will catch up with the prices of gasoline and diesel counterparts again had to be shifted somewhere in the future. And then in some places they did not begin to decrease, but on the contrary — increased.

Respectively, in the current conditions the role of the states only amplifies. It is necessary more and more money for support of an electric segment. But problems arise not only from the state but also from the end user.

Per capita

We believe we will surprise nobody if we tell that development of an electric segment is an expen-sive pleasure. However the whole researches are devoted to this, apparently, banal thought. So, ac-cording to data of ACEA, the smallest sales of electric cars are observed in the countries with the low level of the income: in EU countries with the general share of the market of electric cars less than 3% of GDP per capita lower than €17 thousand, and their neighbors from shares of an electric segment more than 15% per capita account for over €46.

Let’s add that fact here that a half of all points of charging of electric cars in the European Union is concentrated only in two countries. One tenth ES square is a share of these countries. These are the Netherlands (90 thousand chargers) and Germany (60 thousand).

Indirectly, this suggests that the electric car in the EU remains predominantly a luxury item. And deterioration of economic conditions forces to ask a question: but whether the number of the Euro-pean Union countries with GDP per capita less than €17 thousand will increase (without inflation). Certainly, at the moment it is impossible to exclude probabilities of that the authorities of the EU will manage to cope with economic difficulties and to overcome negative consequences of the world energy crisis. But the scenario at which a number of the countries of Europe will fall to the GDP per capita below the threshold values necessary for development of electric transport is submitted to much more probable. It means that in general demand for motor transport can be reduced. Problems of a car market threaten cars with internal combustion engine in Europe much more than a ban which is accepted by heads of the EU. Especially as coal electric generation already proved: if necessary a ban can be slowed down.

On a global scale the electric mobile market continues to develop. Total world sales for the first half of the year made 4.2 million units (63% more than for the similar period of 2021). The greatest pro-spects this year expect again the electric car market of China: considering the current dynamics of sales, in this country about 5-6 million electric cars have to be realized. According to Canalys, in to-tal 2.4 million electric cars were sold for the first half of the year in the mainland of the People’s Re-public of China.

The Russian Federation has its own plans of electric car segment as well as economic difficulties. The European Union selflessly teaches us from its mistakes in a neighborly manner.And we should not cut these useful classes.