European Car Sales Decline in January as Combustion Engine Sales Fall Short of EV Gains

Sales data reveals challenges for automakers amid evolving market trends / Reuters

New car registrations in Europe experienced a decline of 2.1% in January, primarily due to a significant drop in sales of petrol and diesel vehicles that overshadowed the growth of fully electric and hybrid-electric car registrations, according to industry data released by the European Automobile Manufacturers Association (ACEA). The overall sales figures across major markets such as France, Italy, Germany, and the United Kingdom showed a downturn compared to the previous year, with only Spain reporting an increase in sales among the top automotive markets.

This decline in car sales is noteworthy as the European Union prepares to unveil plans for the auto sector on March 5, following discussions with automotive manufacturers, labor unions, and various interest groups. As EU carmakers face heightened competition from Chinese manufacturers and potential tariffs from the United States, they are pressing the Commission for leniency regarding penalties tied to new CO2 emissions targets that took effect in January. Some manufacturers have opted to raise prices on petrol engine models in an effort to stimulate electric vehicle (EV) adoption, but there are concerns that this strategy may result in fewer overall car purchases by consumers.

Electric vehicle advocacy groups are warning that any attempt to relax emission targets could jeopardize investments in EV infrastructure and weaken the EU’s competitive position in the global automotive market. In January, the total number of cars sold across the European Union, the UK, and the European Free Trade Area (EFTA) fell slightly below 1 million units, marking the lowest sales volume since August of the previous year. Despite the overall decline, Volkswagen and Renault reported sales growth of 5.3% and 5.4%, respectively, while Stellantis saw a significant decrease of 16% in sales.

In the EU, car sales dropped by 2.6%, despite a remarkable 34% increase in registrations of battery electric vehicles (BEVs) and an 18.4% rise in hybrid electric vehicles (HEVs). However, sales of plug-in hybrids (PHEVs) declined by 8.5%. Electrified vehicles, which include BEVs, HEVs, and PHEVs, comprised 57.2% of all passenger car registrations in January, up from 47.4% in the same month the previous year.

Analyzing the largest automotive markets in the EU reveals a mixed picture: Spain saw a sales increase of 5.3%, while France, Italy, and Germany experienced declines of 6.2%, 5.8%, and 2.8%, respectively. In the UK, sales fell by 2.5%. The current landscape highlights the dual challenges faced by European car manufacturers as they work to reduce costs while navigating fierce competition from international players, particularly those based in China. Additionally, they must prepare for potential import tariffs imposed by the administration of U.S. President Donald Trump, who has already increased tariffs on aluminum and steel and is considering additional tariffs on imports from Mexico, Canada, and the automotive sector as well as semiconductors.