Standing outside the New Year reception hall of an auto industry association in Berlin this week, BMW CEO Oliver Zipse had reason to feel vindicated.
On stage, Transport Minister Volker Wissing preached to the crowd of politicians and industry executives about the importance of “technological openness” in reducing transport emissions.
The focus on battery-powered vehicles by politicians and manufacturers is leaving Germany’s most important industry exposed, he said, with a forecast of plummeting demand for electric vehicles in Europe’s biggest car market looming over his message.
Zipse has been making the same point for years, advocating flexible production lines for combustion, hybrid and even hydrogen-powered cars. His cautious strategy – which accords with that of his predecessor – has been attacked as not aggressive enough against electric leader Tesla Inc.
Now, Zipse seemed to have seen into the future. With EV adoption slowing and plug-in hybrids returning from the fringes, BMW’s careful approach no longer seems like a bad idea.
“In Germany, demand for electric vehicles doesn’t look good this year,” said Jan Burgard, head of automotive consultancy Berylls Strategy Advisors. “The high end of the electric vehicle market is almost saturated, and there is little to offer in the low 25,000 euro segment.”
After years of strong growth, selling electric vehicles is becoming increasingly difficult. Generous government incentives are disappearing in Europe and in the United States fewer and fewer vehicles are eligible for them. While a range of new models and low-commitment leasing options have attracted the attention of EV enthusiasts, a few years into the EV revolution, infrastructure and price still remain barriers to widespread adoption.
In Germany, sales are expected to fall 14% this year in response to government subsidies in December, the first decline since 2016, according to lobby group VDA. Globally, market watchers have scaled back their forecasts amid the enduring reality that the vehicles are far less affordable than equivalent combustion-engine cars, despite Tesla’s price war.
Thursday’s event was an attempt to inject some optimism into an increasingly gloomy industry. Wissing praised German automakers and extolled their technology as “celebrated abroad.” When asked what the government could do to strengthen the German electric vehicle market, the transport minister had one thought: “Charging infrastructure.”
Yet Berlin has lagged behind on this front. In October 2022, Wissing launched an ambitious strategy to invest 6.3 billion euros ($6.85 billion) in a national infrastructure that would increase the number of charging stations in Germany to one million in 2030.
It didn’t all go as quickly as expected. According to the infrastructure authority, until last September there were only around 105,000 functioning public charging stations in Germany.
At the current pace of construction, VDA noted, Germany will have to triple the pace if it wants to reach its 2030 goal.
The pricing conundrum, and who will pay the price, remains unsolved for many years in the transition to electric vehicles. While politicians and auto industry representatives at the VDA event agreed that pricing was key to reigniting interest in electric vehicles, no one would say who should finance such infrastructure expansion – or how. According to a Deutsche Bank analyst note, rising electricity prices have further reduced demand.
The other major challenge to EV adoption is price. The coalition must reach its goal of putting 15 million electric vehicles on the road by 2030, or face missing emissions targets. In November, only about 1 million, or 2% of all cars — on German roads they were fully electric. Without additional subsidies, some analysts believe reaching the 2030 goal will be a challenge.
“I think it is unrealistic, from today’s perspective, to reach 15 million electric vehicles on German roads by 2030,” said Burgard, the automotive consultant.
Automakers are already starting to hedge their bets. Volkswagen’s Audi brand is reducing its electric vehicle lineup and VW is taking a step back from plans to sell stakes in its battery unit. If the slowdown in electric vehicles turns into a long-term crisis, it could undermine billions in investment in the sector and mean automakers will be unable to keep up with new emissions-cutting regulations.
Meanwhile, the ever-longer road to electric vehicle adoption is encouraging drivers to stick with their old, polluting cars for longer, according to DAT, which compiles data on the auto industry.
For BMW’s Zipse, all of this could be seen as grounds for a victory lap. In an interview with Handelsblatt last year, he went so far as to accuse those sounding the death knell of combustion engines as “negligent,” given the reach of electric vehicles.
“Do you think that regions like Southern Italy will have charging stations in every country within twelve years?” He said.