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Europe is “returning to petrol”, according to a new article from Yahoo Finance which highlighted Volkswagen’s EV sales as the canary in the coalmine.
Sales of Volkswagen’s electric vehicles have declined by nearly 25% in Europe, with a noticeable shift back to gasoline-powered cars amid waning interest in battery-operated models, the report says.
It notes that the downturn, observed in the initial quarter of the year, is attributed to heightened inflation and escalating energy costs, which have cooled consumer enthusiasm for electric cars. Worldwide, Volkswagen, which also owns brands like Audi, Skoda, and Porsche, saw a 3% decrease in electric vehicle sales, totaling 136,400 units. In contrast, sales of traditional combustion engine vehicles rose by 4%, approaching two million units.
The report notes that demand for electric vehicles has dipped as governments in Europe reduce subsidies and soften ambitious goals to phase out petrol and diesel cars.
In the UK, Prime Minister Rishi Sunak delayed the prohibition of new petrol and diesel sales from 2030 to 2035 and removed incentives for new EV purchases last year. Despite Volkswagen’s strong presence in the UK market with models like the Audi e-Tron and Volkswagen ID, petrol car demand is growing faster than electric.
In the EU, discussions are ongoing to modify bans on fossil fuel cars to permit synthetic fuels. The end of EV subsidies in Germany, coupled with the EU pausing emissions targets, has notably impacted Volkswagen’s sales. Additionally, competition is intensifying with cheaper, subsidy-backed Chinese EVs entering the market.
Despite a significant drop in European EV sales, Volkswagen reported a 91% increase in China. Other manufacturers like BMW and Stellantis are also adjusting their electric vehicle strategies amid fluctuating consumer interest.
“Our diversified product portfolio gives us the necessary flexibility to compensate for fluctuations in demand in certain segments – as is currently the case with all-electric vehicles – in others,” said Hildegard Wortmann, a member of Volkswagen’s executive board.
Recall we have been writing about the influx of competition in EVs coming from China. Earlier this month, Mercedes-Benz boss Ola Källenius urged the EU to lower tariffs on EVs that are being imported from China. The call comes at the same time the European Commission is mulling whether to raise import duties as Europe continues to grapple with Chinese subsidies.
Källenius said that the increased competition would “help Europe’s carmakers produce better cars in the long run” and that government protectionism is “going the wrong way.
Källenius’ comment is a free market slap in the face to the EU, which has claimed China is “distorting” the EV market. Recall back in September 2023 we wrote that the EU was opening an investigation into Chinese EV subsidies.
At the time, we noted that European Commission President Ursula von der Leyen was taking exception with the fact that “the global market is flooded with cheap Chinese cars”.
