- The European car market is on the mend, with new registrations expected to grow by 2.2% in 2024 and another 4.1% in 2025.
- However, this growth comes with a caveat – a shift towards less profitable sales channels.
- In terms of electrification, the hype has subsided, leading to a more rational outlook: a stagnant 2024 followed by a regulatory-driven surge in 2025.
The car market challenges: From a seller’s to a buyers’ market and towards restrictive CO2 policy
In 2023, the European car market rebounded with a 13.6% increase in new car registrations. However, the total volume of 12.9 million units was still significantly lower than the pre-pandemic level of 15.9 million new cars seen in 2019.
For 2024 and 2025 the market environment remains challenging. While 2023 deliveries benefited from a substantially increased order backlog, car demand, weighed down by the cost-of-living crisis, has become the bottleneck again. Manufacturers and their networks have resorted to discounts at dealerships, leasing deals, and tactical rental registrations to maintain growth. Dataforce predicts a further increase by 2.2%, bringing the European car market to 13.1 million new passenger car registrations.
Another effect considered in the prognosis is the imminent tightening of CO2 targets. To achieve the target of less than 93.6 g/km CO2 (WLTP) in 2025, an average BEV (Battery Electric Vehicle) share of 23% alongside a PHEV (Plug-In Hybrid) market share of more than 8% are required. Manufacturers will need to slash ICE promotions and focus on BEV and PHEV sales. OEMs who overachieve their current targets can also bring forward ICE (Internal Combustion engine) deliveries into 2024.
From an economic point of view, accelerating GDP growth, lower financing costs and recovering real disposable incomes would support a faster growth, but with CO2 regulations in mind, Dataforce expects an increase by only 4.1% to 13.7 million units in 2025. A market volume still significantly below the pre-crisis standards.
Electrification: A look beyond the hype cycle
And what are the perspectives for BEV registrations? January to May 2024, EV uptake has stalled with registrations of battery-electric cars growing by only 2.5% and their market share slightly down from 13.7% in the first five months of 2023 to 13.4% in 2024. The main beneficiaries of the current market recovery are affordable petrol cars and the rapidly growing range of full-hybrid models. On top of that, EU’s the tariffs on Chinese-built BEVs have already led to first price hikes for car buyers.
Against these figures, it is necessary to take a more balanced view on electrification. BEV demand is experiencing a temporary setback due to the withdrawal of government support, rising financing costs, and shrinking disposable incomes.
However, these factors will improve with the economic cycle and technological progress of BEVs, such as the shift from NMC to LFP for entry-level cars, or the broadening adoption of 800V technology and enhanced energy efficiency, that make medium sized cars more suitable for longer trips.
From Dataforce’s point of view, the pivotal factor will be the charging infrastructure. For most drivers with a wall box at home or at work, BEVs are a large quality of life improvement: No more trips to the pump station, smoother driving and better acceleration. On the other hand, for people without the possibility to use charge at home, a BEV restricts the usual freedom provided by a car, which will hinder mass adoption until hassle-free public charging is available.
In total, Dataforce predicts a BEV decline by 2.5% for the full year 2024. In 2025, the stringent CO2 regulation triggers another jump with BEV volumes being pushed beyond market demand. The further development from 2026 to 2029 depends on many external factors: Will the EU reverse their Green Deal and allow more CO2 emissions for longer? Can governments maintain or even re-increase financial support for BEV buyers? And most importantly, will charging infrastructure expand fast enough to allow more drivers the switch? In a status quo scenario with EU CO2 regulation maintained and a gradual buildup of charging infrastructure, BEVs will gradually gain market share.
About Dataforce forecasts
Dataforce produces detailed sales forecasts for the passenger car market three times a year. Nine European countries (Germany, France, Italy, Spain, UK, Belgium, Netherlands, Poland, Switzerland) and the European market in total are analyzed. The forecasts differentiate between the target groups and include an outlook on the development by fuel type. Further information on the Dataforce forecast can be found at https://www.dataforce.de/forecast/.
