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European Auto Finance Insights – January

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The very future of the European automotive industry is at the heart of discussions between policy makers and manufacturers in the face of extreme commercial challenges.

On January 30, the European Commission will officially open what it is officially calling a “Strategic dialogue” on the future of the sector as manufacturers attempts to meet decarbonisation challenges while fending off the commercial threat posed by Chinese OEMs.

A new report based on the insights of 20 senior automotive leaders forecasts that China will overtake Germany as the principal player in the global automotive industry by 2040 thanks to their control of the entire EV supply chain.

Given the millions of jobs and billions of Euros of investment involved in Europe’s automotive sector, the EC acknowledges the “need to support this industry in the deep and disruptive transition ahead.”

For OEMs, this means a more realistic pathway to zero emission vehicles, and crucially one that is driven by demand rather than penalty-backed regulation. The relative weakness of consumer demand for new electric vehicles is already alarming asset finance companies that have residual value exposure to the technology. If new car, van and truck buyers don’t want electric vehicles, why would buyers of secondhand vehicles want battery power?

The first priority of ACEA is a relaxation of the EU’s CO2 targets for new vehicles that kicks in this year, along with repeated calls for an acceleration in EV charging networks to support the growing electrification of the vehicle parc.

Provisional figures suggest EV sales in the EU fell by 6% in 2024, compared to the year before, and saw their market share slip by a percentage point to 13.6%. OEMs need a sharp increase in EV sales to meet their CO2 targets, but with November registrations down by 25% in France and 22% in Germany, the two largest EU markets, the industry needs to see a sea change in demand.

A deeper dive into the data also reveals that sales by Chinese OEMs are soaring, albeit from a low base, with Leapmotor up 296% year-on-year in November, BYD up 127%, Xpeng up 93% and Geely up 33%. As a bloc, Chinese OEMs now account for 13.2% of Europe’s battery electric vehicle sales.

And there’s likely to be a blurring of distinctions between European and Chinese OEMs in future, illustrated by the partnership between Barcelona-based Ebro-EV Motors and Chery to build electric cars in a former Nissan plant in Spain. CA Auto Bank, part of the Crédit Agricole Group, has signed a strategic agreement with EBRO, to provide finance for the importation of components, to offer credit lines to dealerships, and to introduce flexible leasing and financing solutions through Drivalia, its mobility subsidiary.

The newly appointed heads of the European motor industry, Ola Källenius, President of the European Automobile Manufacturers’ Association (ACEA), and Christian Levin, Chair of ACEA’s Commercial Vehicles Board, have called for “enabling conditions and predictable, long-term incentives to create stability and drive investment,” as the auto industry prepares to meet the “monumental” challenges that lie ahead.