• Electric Vehicles
  • Policy and Regulation
  • Europe
  • Vehicle Adoption
  • Electric Vehicle Incentives

Europe's EV Market Proves Resilient Despite 2020's Challenges

Raquel Soat
Jan 14, 2021

Guidehouse Insights electric car

In a year that spelled catastrophe for many industries and markets around the world, the plug-in EV (PEV) market in Europe told a different story as record sales numbers were seen across the region. Europe saw over 500,000 battery EV (BEV) sales in 2020 and nearly 1 million sales of plug-in hybrid EVs (PHEVs) and standard hybrid EVs (HEVs)—a 50% increase in total sales from 2019.

In the UK, the automotive market had its worst year since 1992 with sales down 30% in 2020, but PEVs had their best year yet with over 250,000 new registrations of BEVs and PHEVs. Norway, the European market with the highest share of PEV sales, had a record month in December with 87% of vehicle sales being either BEVs or PHEVs. Similarly, Sweden saw 50% of its December vehicle sales as PEVs. So why, in the face of a pandemic and economic shutdowns, have PEVs been resilient in Europe?

Supportive Policies Encourage EV Adoption

The primary reason: policy. Many European countries have policies supporting the growth of EV markets, whether it be emissions regulations, purchase incentives, or bans on internal combustion engine vehicles. Countries such as Norway, Denmark, France, and the UK have committed to banning (to some degree) the sale of new internal combustion engine vehicles in the next 10-20 years. These policies encourage automakers to increase model availability and encourage consumers to purchase PEVs.

As for the cost, many European countries not only have preexisting purchase incentives for PEVs but also made investment in clean transportation a priority when passing stimulus packages in the face of the pandemic. In Germany, the stimulus package passed in 2020 allotted funding for additional incentives for new (and used, in some cases) PEVs purchased through the end of 2021. The incentives range from €3,760 ($4,570) to €9,000 ($10,940) with the potential for an additional €1,500 ($1,820) in local incentives depending on the state and city of residency. Germany also included incentives such as 10 years of ownership tax exemption for BEVs, free and discounted parking, and reduced taxes on PEV company car purchases.

Emissions Targets and Model Availability Are Also Increasing Adoption

But potentially the most impactful policy influencing PEV growth in Europe is new carbon dioxide fleet emissions targets that were phased in during 2020. From 2021 on, automakers’ fleet-wide emissions target in the European Union for new vehicle sales will be 95 g of carbon dioxide/km or about 57 mpg for gasoline vehicles. The new standards are pushing automakers to sell more fuel-efficient vehicles or risk financial penalties.

Policy is likely playing a large role in the growth of EV markets in Europe, but increased model availability has been key as well, particularly in popular and more affordable market segments such as compact cars and crossovers. New vehicles such as the Volkswagen ID.3, MG ZS EV, and Polestar 2 all entered the European market in 2020 to a successful sales year in Europe. In some European countries such as the UK, over 100 plug-in models are available for consumers to purchase. Notably, several OEMs held back on releasing new models in 2019 due to the new efficiency standards phasing in during 2020, which may have created pent-up consumer demand that led to increased PEV sales in the first half of 2020. Despite the economic downturn seen in 2020 and steep automotive sales declines in many countries, PEVs in Europe proved to be resilient thanks to supportive policy, primarily in the form of efficiency regulations, and increased model availability for consumers.