European consumers are buying electric cars at a faster pace than ever before, encouraged by government subsidies and the availability for the first time of models built by their favorite brands.
The boom is so strong that Europe overtook China last year as the world’s largest electric vehicle market. Its share of new electric car sales almost doubled to 43%, while China and the US lost market share.
But Europe’s growth is largely based on government incentives distributed during the pandemic, and analysts warn that the momentum could be reversed if and when that support is withdrawn. Most government subsidies for electric vehicles are limited in scope and will expire by the end of this year.
“The market is extremely sensitive to government and corporate cuts,” said Arndt Ellinghorst, a car analyst at Bernstein Research. “With the elimination of subsidies, sales of electric vehicles will fall by 30-40% for at least one or two quarters.”
Without subsidies, electric vehicles are still much more expensive than equivalent combustion engine vehicles. This will not change until the end of this decade, analysts say, as battery prices fall due to new technology, the larger scale and competition.