Ouch! Europe’s new car registrations tanked 5.1% last month—here’s why EV momentum is fading and what it spells for drivers.

Europe’s automotive market faced a significant setback in June, with new car registrations dropping 5.1% to 1.24 million vehicles—the steepest decline in 10 months—as growth in battery-electric vehicle (EV) sales slowed to its weakest pace this year. This downturn underscores challenges for automakers pushing toward electrification, prompting calls for stronger demand incentives, reports Bloomberg.com.

Automakers Urge More Incentives as EV Adoption Falters

Automakers are pressing European policymakers to boost support for battery-powered vehicles. The European Automobile Manufacturers’ Association (ACEA) highlighted consumer hesitation amid the sales slump.

“Consumers clearly remain cautious, and more robust demand measures will remain a crucial element to get the transition up to speed,” the trade group known as ACEA said in an emailed statement.

Battery-electric car sales rose 14% in June, buoyed by fresh model introductions and residual government subsidies in select nations. However, this marked the year’s slowest expansion, revealing uneven uptake. Plug-in hybrids, blending electric propulsion with internal combustion engines, performed stronger. Their registrations surged 38%, as consumers favored these versatile options for bridging the gap to full electrification.

This raises questions about the pace of Europe’s shift to zero-emission mobility. Adoption varies widely due to inconsistent charging infrastructure and differing national strategies. Building on that, the European Commission recently provided relief by delaying stricter CO2 emissions targets for three years, originally slated for this year. This adjustment eases immediate pressure on manufacturers like Volkswagen AG, BMW AG, and Mercedes-Benz Group AG.

Regional Sales Slumps Highlight Economic Pressures

The decline hit hardest in key markets. Germany, Europe’s largest auto hub, saw registrations plummet 14% in June, with a 4.7% drop over the first half of 2024. Italy followed with a 17% fall, while France experienced a 6.7% decrease. These figures reflect broader caution among buyers, compounded by economic uncertainties.

In contrast, the UK bucked the trend with a 6.7% sales increase last month. This uptick followed the reintroduction of grants up to £3,750 ($5,100) for EV buyers, reviving support three years after the prior administration scrapped subsidies for individuals. Such measures demonstrate how targeted incentives can spur demand, offering a model for other countries.

For European carmakers, slackening home-market EV sales compounds troubles elsewhere. They are losing share in China to aggressive local competitors eroding volumes and margins. Leadership instability adds strain: Stellantis NV appointed a new CEO recently, and Renault SA is hunting for a permanent one.

Broader Implications: Tariffs and Market Volatility

U.S. policies introduce further risks. President Donald Trump’s tariffs on imported vehicles and components threaten billions of euros in earnings for Europe-based firms operating stateside. This external pressure heightens the need for robust domestic EV growth to offset vulnerabilities.

Stock reactions were mixed on the sales data release. Volkswagen and BMW shares climbed up to 2.4% and 2.5% in Frankfurt, possibly reflecting hopes for a U.S.-EU tariff resolution. Stellantis, however, dipped as much as 1.9% in Milan, signaling investor concerns over the downturn.

Overall, these trends point to a transitional phase in Europe’s EV landscape. While plug-in hybrids provide a temporary boost, sustaining battery-electric momentum requires aligned policies and infrastructure investments. Automakers must navigate regulatory leniency alongside economic headwinds to accelerate the shift, ensuring long-term viability in a competitive global arena.