There are a lot better explanations online of course - Harry Metcallfe in his podcast Harry’s garage addresses it far better than I can
At a very high level
- EU set in place a set of regulations to force manufacturers to hit specific targets for sales of zero emission vehicles
- they work on the average emissions of all vehicles sold across a year I think called the Fleet
- each year the permitted percentage of all no BEV vehicles sold by the manufacturer in the EU must fall by a set percentage of the total Fleet
- if the manufacturer fails to hit the target percentage then they face a fine which I think is 15k euros per car in excess of the permitted percentage
- UK decided to agree to a similar concept with tweaks
So if you are Tesla or BYD it’s no concern as all your sales are BEV and so you are compliant so no constraints impact you
If you are.VW/Audi it’s very different and you can only sell your petrol/diesel and your hybrid vehicles if you can sell a sufficient number of BEVs - if the buyers don’t buy your BEV in sufficient numbers (say because they can get a Chinese or Korean or US Tesla for less or they see the alternative as more attractive) you are constrained in ThE number of ICE vehicles you can sell
The European and UK markets were impacted by Govt Incentives aimed at company buyers and leasing fleet purchasers as that represents a big slice of the new car buyers BUT They seem to have largely hit the upper limit of the number of the initial segment that want zero emission BEV and the depreciation performance of many BEVs has not been great
That then results in a fight for the smaller vehicle market in which it seems the Chinese and Koreans can produce a far cheaper and seemingly more attractive option and people are not buying the BMW VW Merc Ford Stellantis etc options in sufficient volumes
So we now have a system in the EU that Better assists non EU and UK based manufacturers and adversely impacts the traditional manufacturers
End result is that the Trad manaufacturers are in a very tough spot - they have compliant models that are more expensive and less attractive to the limited pool of BEV buyers
BEV sales are apparently still increasing as a percentage of sales but in the EU the really desirable option for many is the Hybrid nit the BEV and all the cost of living issues affecting all modern democratic countries means many are holding onto existing vehicles and not looking to buy new
The Trad manufacturers have relatively attractive PluG in hybrid and mild hybrid options that the market seems to want to buy but the regulators have set the regime in place to focus on battery electric vehicles and plug in and self charging hybrid and hydrogen and synthetic fuel vehicles are within the punishable class of vehicle - I think there is an attempt under way to adjust that but THE Regulators seem to be fixated by battery tech based vehicles
Lots of discussions under way supposedly and EU might revise the structure failing which some of the major manufacturers are saying they will have to take tough decisions - this is all about cars but they same challenges apply to goods vehicles buses and coaches and aviation AND the maritime transport industry - the EU doesn’t Currently seem to be well positioned and it’s regulators have created a regime that actively disadvantages its own home companies (well that is what they are saying and from the outside it’s looks to be accurate )
Lots online and in the financial press - I’m no expert but it’s being suggested that the regulatory regime threatens the survival of auto manufacture in the EU and to a degree UK - we have seen some movement of production out of the EU - I think Ford recently announced an end to production of some new models the market is not buying in sufficient volumes to make it economic and talk of other manufacturers in Germany facing pressures that could mean they need a Govt bailout
Many who favour free markets (within reason) will point to the challenges of external regulation and the tax code being used to impact markets - lots of big philosophical questions tied up in all this but the clear bottom line in late 2025 is that a number of traditional manufacturers are suffering financially and it seems the Chinese and Korean manufacturers are taking market share and the regulatory regime is a factor that assists them
As I say a lot more on this online and I am no expert just someone that watches from afar
