Why are electric car sales dropping

Automakers that have invested particularly large amounts of capital in the development, deployment and manufactureof pure electric cars are being forced to rethink their planning after sales of zero-emission cars plummeted.

Volkswagen Group has warned that it may close its Brussels-based Audi brand assembly plant due to a sharp drop in demand for high-tech electric cars, Reuters reports. Europe’s top carmaker suffered a severe financial hit, which resulted in it cutting its profit margin target for this year.

VW has so far not closed any of its plants since it closed its Westmoreland plant in Pennsylvania, US, in 1988.

Automakers have been hit by lower-than-expected demand for EVs. They have invested hundreds of billions in the development of zero-emission cars and the evolution of electric mobility, but sales have not followed the upward trends they had predicted when they announced their programs.

Audi had warned shareholders and investors earlier this year that its sales, in 2024, would fall and that it was making major efforts to revamp its range with new models and cut production costs.

VWW said in a statement on July 9 that the cost of finding an alternative use for the Brussels plant or closing it, as well as other unplanned costs, will have a total impact of up to €2.6 billion in fiscal 2024 on its financial budget.

Also, another worrying development for electrification is Mercedes-Benz’s decision to slow down plans to develop its battery plant for pure electric cars due to lower demand for EVs, Automotive News Europe reports.

Mercedes-Benz’s prediction that 50% of its sales will be either all-electric models or plug-in hybrids by 2025 looks increasingly unlikely, Reuters reports.

Mercedes-Benz will wait to see if demand for electric vehicles increases before ramping up battery production as lower projected EV sales suggest it will no longer need the capacity originally planned for 2030, said Markus Schafer, the group’s chief technology officer.

The luxury German carmaker said in 2022 it would need more than 200 gWh of battery capacity by the end of the decade and planned to build eight cell factories worldwide with partners, including four in Europe.

However, with EV demand lower than many automakers had predicted, it also forced Mercedes-Benz to rethink its programs.

The 200 gWh forecast was based on the assumption that all of Mercedes-Benz’s annual sales of about two million vehicles would be electric by 2030, Schaefer said on July 8.

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