Alternative fuel passenger demand in Europe buoyed by BEV, hybrid registrations during Q1

12 May 2017 Ian Fletcher

Alternative fuel passenger car registrations in the Europe have made strong gains in the first quarter of 2017 driven by BEVs and hybrids, according to data released by ACEA.

IHS Markit Perspective:

  • Significance: Alternative fuel passenger car registrations in the Europe have seen strong gains in the first quarter of 2017 driven by BEVs and hybrids, according to data released by ACEA.
  • Implications: This demand remains stimulated by new and upgraded models featuring this technology as well as government incentives and subsidies.
  • Outlook: While the share of vehicles being registered with this technology continues to grow, it remains a fraction of the EU market place. IHS Markit expects that growth will continue but technologies based around traditional internal combustion engine (ICE) technologies will continue to rule the roost well in to the next decade.

Sales of alternative fuel passenger cars in Europe have risen during the first quarter of 2017. The data released by the European Automobile Manufacturers' Association (ACEA) last week highlighted that this was lifted by demand for "electric rechargeable vehicles" comprising both battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEV). This rose by 29.9% year on year (y/y) during the three months ending 31 March to 47,196 units in the European Union (EU). A further 15,144 units were registered in the European Free Trade Agreement (EFTA) market, a gain in itself of 21.5% y/y.

On an individual basis, the market for BEVs in the EU has jumped by 49.0% y/y during the past quarter to 24,592 units. This has been driven by registrations of this type of passenger car more than doubling in Germany, which introduced market support for the technology less than a year ago. France continued to lead the regional market, with registrations up by 22.9% y/y, no doubt helped by the launch of the longer-range, updated Renault Zoe. The UK market grew by 46.5% y/y, as customers helped by strong government support were also incentivised to make the switch by changes in vehicle excise duty (VED), particularly in the over GBP40,000 bracket. In the Netherlands, registrations have grown by 84.8% y/y, although this may be partly down to sales being pulled forward during late 2015 which caused a lower base of comparison during the first months of 2016.

Growth in the BEV market has been more modest in EFTA, where registrations have grown by 11.6% y/y to 8,035 units. The lion's share of sales in this region takes place in Norway, where registrations increased by 8.7% y/y. However, the biggest percentage gain was in Switzerland, up 36.2% y/y due to new models such as the Tesla Model X.

Registrations of PHEVs have been far also been buoyant during the three months. During the quarter, demand has grown in the EU by 13.0% y/y to 21,644 units. The leading market for this type of passenger car has been the UK where 6,730 units were registered, but this was a decline of 9.5% y/y, as despite changes to the VED rules, changes to the incentives for PHEVs a year ago pulled demand forward considerably. However, in Germany, an influx of new models and incentives has caused demand to jump by 50.1% y/y to 5,264 units. Another huge growth market has been Sweden (up 89.3% y/y) and Belgium, which is up by 49.2% y/y. However, France has fallen 7.3% y/y, while this category of vehicle has yet to recover in the Netherlands after incentives were withdrawn more than a year ago and registrations as a result are now down 69.7% y/y.

The gains in PHEV registrations have been even more considerable in EFTA though, with an increase in the quarter of 58.7% y/y to 6,153 units. Again, the market in this region is heavily influenced by Norway, which has jumped 76.9% y/y during the past quarter alone to 5,607 units, which offset a fall back in Switzerland.

The latest ACEA alternative fuel vehicle data have also shown that demand for hybrid electric vehicles (HEV) has also improved strongly this quarter. Combined registrations of full hybrid and mild hybrid passenger cars have surged by 61.2% y/y to 111,006 units. The majority of markets in the region have recorded considerable double-digit and even triple-digit percentage gains this month, boosted by a host of new models brought to the market.

As for HEV sales in EFTA, registrations have increased by 36.2% y/y to 7,188 units in the quarter, as growth in Norway reached 47.7% y/y to 5,424 units.
ACEA has also published the data for "Other Alternative Fuel Vehicles" comprising those powered by natural gas, liquid petroleum gas (LPG), and ethanol (E85). Registrations for such vehicles have grown by 10.4% y/y in the EU to 54,743 units as the Italian market - where LPG registrations have rebounded -- has grown by 8.0% y/y to 46,020 units. Poland has also been greatly influential with an increase of 72.9% y/y.

Outlook and implications

The latest data for alternative fuel vehicles shows that there is a growing momentum in the market place for such vehicles, but particularly for those with some degree of electrification. This has been supported by the wider availability of vehicles with these technologies such as well as existing models being updated with longer ranges to combat incoming opposition. However, a large part of this improvement has also come from the fact that such vehicles still depend on market incentives. A clear example of the influence of incentives is in the results for the German market where from July 2016, customers purchasing a BEV or fuel cell electric vehicle (FCEV) receive a EUR4,000 grant, as well as an exemption from the annual circulation tax for 10 years. Furthermore, PHEV and BEVs with range extenders also get a

However, reducing incentives has also resulted in falls in the market place for these types of vehicles. As mentioned above, the reduction of incentives for PHEVs in the UK has led to a modest fall. Adjustments in Denmark have resulted in a big fall this year on an already lower base of comparison. This is resulting in the Danish government putting forward adjustments to its plan.

It should also be noted that even with the improvements in the alternative fuel vehicle category in the EU, the market is still dominated by traditional gasoline (petrol) and diesel models. Of the passenger cars registered during the first quarter of 2017, total alternative fuel vehicles had a share of 5.1%. Broken down, BEVs made up 1.1% of the total market, and without government support from grants or tax benefits, there is a likelihood that this would fall. IHS Markit expects that while the share of Electric Plug-In (comprising BEVs and range extender BEVs) passenger cars will continue to grow in the coming years though, although not to the degree that has been suggested by some commentators. Indeed, our current forecast suggests that demand will continue to be based around traditional internal combustion engine (ICE). It seems that automotive industry leaders believe that this will remain a mainstay despite growing regulatory pressures. For example, Volkswagen (VW) Group CEO Matthias Mueller said at the company's annual general meeting (AGM) earlier this week that it would be investing EUR10 billion in conventional gasoline and diesel ICE technologies by 2022, with the expectation that this would help make its engines between 10% and 15% more efficient by 2020.

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The above article is from AutoIntelligence Daily by IHS Markit. AutoIntelligence Daily provides same-day analysis of automotive news, events and trends. Get a free trial.


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