European consumers are buying electric cars at a faster rate than ever before, encouraged by government subsidies and the availability for the first time of models made by their favorite brands.
The boom is so strong that last year Europe surpassed China as the world’s largest electric vehicle market. Its share of new electric vehicle sales nearly doubled to 43%, while China and the United States lost market share.
But Europe’s rise is largely based on government incentives distributed during the pandemic, and analysts warn that the momentum could be reversed if that support is withdrawn. Most government subsidies for electric vehicles are limited in scope and will expire later this year.
“The market is extremely sensitive to government and corporate discounts,” said Arndt Ellinghorst, a car analyst at Bernstein Research. “Once subsidies are eliminated, sales of electric vehicles will collapse by at least 30 to 40 percent in at least one or two quarters.”
Without subsidies, electric vehicles are still considerably more expensive than equivalent combustion vehicles. That is unlikely to change until the end of this decade, analysts say, as battery prices drop due to new technology, larger scale and competition.