New car market under pressure

New car market under pressure

Axel Preiss, Head of Advanced Manufacturing & Mobility at EY, is not very optimistic about the rest of the year: “The growth curve is slowly flattening and sales of new cars remain well below pre-crisis levels.” In March, new registrations were 40 percent lower than in March 2019. In Austria, the sales level in March was 20 percent lower than in the same month of 2019. According to Preiss, the causes lie both in the overall economic climate and in industry-specific hotspots: "Weak economic activity, a slight recession with no guarantee of the coming upswing, significant geopolitical tensions - all of this has an impact on the market, especially on the purchasing intentions of both private individuals and companies. Many People simply cannot afford a new car given the high prices.” Preiss expects that the EU new car market will only grow slightly this year. The car manufacturers are trying to counteract this with sometimes considerable discounts: "Overcapacities are clearly causing problems for manufacturers. Underutilized production causes costs. That's why the willingness to offer price reductions is higher again, which will, however, have a negative impact on margins."

In March, new registrations of electric cars in the EU fell by eleven percent, and the market share fell slightly from 13.9 to 13.0 percent. In Austria, sales of electric cars fell by eight percent, and the market share fell from 19.3 to 18.1 percent. Preiss said: “Demand and interest in electric cars have remained well below expectations in some countries.” In 18 of the 27 countries, new registrations of electric cars fell compared to the same month last year. In addition, electric cars are still a niche product in most EU countries: in at least 14 EU countries, the electric market share was less than ten percent in March. “The electric car market is on the brakes,” observes Preiss. The weak sales development for electric cars could become a problem for some suppliers, as new, stricter CO2 targets will apply to manufacturers in the EU in 2025 and billions in fines will be due if these targets are not met.

"The industry is now in demand and needs to create new incentives that speak in favor of electric cars. Diversification of the target groups should also be considered," advises Preiss. In Austria, the topics of range and costs for changing batteries are among the most frequently mentioned barriers, as are the costs of electricity and setting up a private charging station. Preiss says: “Investments must be made in precisely these points – affordability, including through government subsidies, expansion of the charging infrastructure and increasing range – in order to boost e-mobility.” In addition, the industry now needs reliability, adds Preiss: “The discussion about the end of combustion engines in 2035 is causing uncertainty - and right now the industry needs certainty and planning security because such a transformation requires large investments.”