EU Car Sales Decline in March as Electric Vehicle Demand Slows

New car registrations in the European Union fell by 5.2% in March 2023 compared to the same period last year, according to data from the European Automobile Manufacturers' Association (ACEA). The decline was attributed to the early timing of the Easter holidays, which negatively impacted sales across most EU markets.

The share of electric vehicles (EVs) in new car registrations also dropped, falling from 14.6% in 2022 to 13% in March 2023. Sales of battery-powered cars declined by 11.3%, with a significant 28.9% drop in demand in Germany, Europe's largest economy "despite the EU's plans to ban the sale of new internal combustion engine cars by 2035."

Major automakers like Volkswagen, Mercedes-Benz, and Tesla have all reported falling EV sales in the first three months of the year. The slowdown in EV sales is not limited to Europe, with Tesla also seeing a drop in deliveries in the first quarter, missing analyst forecasts.

Why this matters: The decline in EV demand comes at a crucial time for the EU, which has set ambitious targets to phase out internal combustion engine vehicles by 2035. The slowdown raises questions about the readiness of consumers and infrastructure to support the transition to electric mobility.

Hybrid cars accounted for 29% of the market in March, up from 24.4% a year earlier. Petrol and diesel vehicle sales also decreased, with petrol down 10.2% and diesel down 18.5%. "The ACEA has attributed the overall decline in sales to the early Easter holidays."

For the first quarter of 2023, car registrations in the EU increased by 4.4%, reaching nearly 2.8 million units. Italy and France recorded the strongest growth with a 5.7% increase, followed by Germany (+4.2%) and Spain (+3.1%).

The Volkswagen Group remained the market leader in Q1 with a 24.9% market share, followed by the Stellantis Group and the Renault Group. Toyota, a hybrid specialist, saw its market share jump by 1.1 percentage points to 8.1%.

Industry experts point to the slowdown in EV sales being driven by inadequate investment in domestic capacity and technology development, cost, and charging infrastructure. Consumers are turning to electrified hybrid powertrain products that require less of a lifestyle compromise. "Experts warn that electric cars remain too pricey for many consumers, and charging infrastructure is not extensive enough, making the current slowdown a challenge for government plans to ban petrol cars in the middle of the next decade," the ACEA noted in its report.

Key Takeaways

• EU new car sales fell 5.2% in March 2023 due to early Easter holidays.
• EV share in new registrations dropped from 14.6% in 2022 to 13% in March 2023.
• Major automakers reported declining EV sales in Q1 2023, raising concerns about EU's 2035 targets.
• Hybrid cars gained market share, up to 29% in March from 24.4% a year earlier.
• Experts cite inadequate investment, high costs, and lack of charging infrastructure as factors slowing EV adoption.