LEGACY brands have started to pull back on battery-electric vehicle (BEV) ambitions, and Bloomberg Intelligence’s (BI’s) new car buyers’ poll suggests demand will stall in Europe with consumers wary due to high BEV prices, range anxiety and a lack of charging points.
A scaling back should support 2024 margins as lucrative ICE (internal combustion engine) profit faces less dilution from BEVs, while margins are likely to retreat at pureplays such as Tesla.
Still, BI expect EU automakers’ 2024 outlooks to remain cautious, given rising discounts in Europe, fierce price competition in China, higher input costs, and a deteriorating economic backdrop which typically weighs on a macro-driven sector. BI also found that more governments may delay ICE phaseout, as question marks are raised over BEV’s cradle-to-grave benefits.
Mike Dean, BI Senior Industry Analyst (Autos), said: “EU automakers scaling back BEV ambitions amid waning consumer enthusiasm may boost 2024 margins. Still, this is unlikely to fully mitigate consensus downgrades on rising discounts in Europe and fierce price competition in China amid low sector multiples. We expect resilient Ferrari and Porsche margins thanks to strong order books.”
BEVs are, on average, priced 30% above internal combustion engine vehicles (ICE) in Europe, yet margins are much lower amid rising consumer concern, and automakers and policymakers may pull back on ambitions. Legacy brands face the reality that enthusiasm for BEVs is waning, and their targets may be revised downward, which is positive for margins.
In China, BEV pure plays face intense competition with prices often below a comparable ICE, which has translated into widespread losses at Tesla and BYD. VW is reluctant to compete in such an unsustainable environment and sees China market-share losses until it launches next-generation BEVs in 2026.
Honda and GM have ditched plans to build cheap BEVs, and Tesla’s annual 50% growth expectation is in tatters despite price cuts. Ford is delaying BEV investments.
Consumers Highlight BEV Charging, Range Issues, Prefer Hybrids
Dean, added: “Our BI consumer new-car buying poll in September highlighted European buyers’ concern over the high price of BEVs. Their main issue is a lack of charging infrastructure followed by range anxiety – issues which are unlikely to be addressed in the medium term, and may see more policymakers delay the phasing out of ICE. Charging infrastructure is the biggest challenge, for which there is no quick fix to service a growing BEV fleet. Only 16% of respondents intend to buy a BEV in the next 12 months, which matches the current market share in Europe.”
Luxury automakers may post resilient earnings in 2024, given Ferrari, Lamborghini and Porsche’s robust order books, though the German marque’s exposure – 25% of 2023 unit sales – to a highly competitive Chinese market for its SUVs is a concern. Porsche’s share price has underperformed peers – likely on China concerns – since early August, despite record 911 sales and a strong order book. Even with Lamborghini overtaking Ferrari’s Ebit margin in 2023, VW appears unwilling to entertain a potential €20 billion IPO of the luxury brand.