The global automotive industry is experiencing a significant shift in its growth trajectory, with ING Bank projecting a decline in worldwide car production for 2024. The forecast indicates a low single-digit percentage decrease, marking a departure from earlier predictions of slight positive growth. This downturn is primarily attributed to mounting inventory levels in the United States and a noticeable deceleration in electric vehicle adoption across European markets.
The automotive sector's performance has shown considerable variation during the second quarter of 2024, compelling numerous manufacturers to revise their annual targets. The slowdown in vehicle electrification across Europe and the United States can be traced to multiple factors, including market saturation among early adopters, insufficient charging infrastructure, the discontinuation of government incentives in key markets like Germany, and the persistent high costs of electric vehicles in an environment of reduced consumer purchasing power.
An interesting development in the market has been the resurgence of hybrid vehicles. Manufacturers have responded to shifting consumer preferences by introducing new plug-in hybrid electric vehicles (PHEVs), offering a middle ground between traditional combustion engines and full electric vehicles. This trend reflects a pragmatic approach to the transition toward cleaner transportation options while addressing consumer concerns about range anxiety and infrastructure limitations.
The global car sales forecast has been adjusted downward to 1.8% growth in 2024, marking the end of the robust post-Covid recovery phase. This moderation is influenced by several factors, including elevated interest rates, despite their gradual decline, political uncertainties, and policy ambiguities. The used car market has gained renewed attraction as prices have begun to decrease following improvements in inventory levels.
Looking ahead to 2025, ING Bank anticipates a stabilization in global automotive market volumes. The expected lower interest rate environment in both the United States and Europe could potentially boost consumer confidence. However, the bank emphasizes that key automotive markets may require policy support to achieve positive outcomes. Such support could include new EV subsidies in European countries, particularly Germany, positive effects from Chinese economic stimulus measures, and potential supportive policies following the US elections.
The impact of increased tariffs on Chinese electric vehicles in Europe presents a complex scenario. While these tariffs affect major manufacturers differently, with Tesla facing a 7.8% increase, Volvo an 18.8% increase, and BMW a 20.7% increase, they are not expected to prevent Chinese brands from expanding their European presence. Instead, these trade barriers may accelerate plans for localized production facilities. Currently, approximately 25% of EVs sold in the EU are manufactured in China, including vehicles from prominent Western brands.
The industry's transformation is further complicated by regional variations in market conditions and regulatory environments. While some markets show signs of EV adoption fatigue, others continue to push forward with ambitious electrification goals. This dichotomy is creating a complex landscape for manufacturers who must balance investment in electric vehicle technology with maintaining profitable traditional vehicle lines while navigating varying consumer preferences across different regions.
