Overview
Turkey has imposed an additional 40% tariff on Chinese EVs, as the country prepares to launch (Q1 23) its first domestically produced EV, the Togg. This project has received significant government support with tax cuts, free land, and low borrowing costs. Alongside a government purchase guarantee of 30,000 vehicles per year until 2035. This is a key political pledge by President Erdogan, as he seeks re-election in May. Encouragingly, 7,733 EVs were sold in Turkey in 2022, driven by lower consumer tax rates compared to ICEs. This only equates to over 1% of the country’s passenger car market, so there is massive potential for growth.
The potential for growth, as mentioned above, has attracted the attention of many Chinese producers however BYD are poised to strike first. BYD signed a memorandum of understanding with Turkish distributor ALJ Turkiye to enter the Turkish EV market with its passenger and light commercial vehicles. ALJ Turkiye will now sell and provide after-sale services for BYD's EVs in Turkey.
Tesla has cut prices in the USA, for its Model S and Model X by 4% and 9% respectively, which are its two most expensive EVs. This is Tesla’s fifth price adjustment to date and so far these cuts have stimulated demand. This symbolises that we are in a midst of a price war, which Tesla kickstarted in January. We expect other OEMs, in the coming weeks, to announce price cuts.
Due to Tesla’s price cut announcements, BYD suffered an $18bn wipe-out in value over the past month. The US-listed shares fell 14% in February however YTD BYD shares are up 8%. Tesla has been proactive in cutting prices in China to boost demand. This has helped and along with having strong Q4 earnings (beating certain forecasts), Tesla share prices have risen by 9%. Although BYD has a strong market share, a healthy balance sheet and a strong pipeline, the intrigue will be how BYD and other OEMs respond to this price war.
Volkswagen (VW) Group has raised and set a new target of at least 80% of its sales in Europe to be BEVs in 2030. This is a very ambitious target as last year full-electric cars only accounted for 10% of total sales. No guidance has been given as to how they hope to achieve this ambitious European target. However, VW announced earlier in the year, they will be launching a number of new (and refreshed) models under its ID BEV model.
McGills Buses (Scotland’s Largest Independent Bus Company) announced it is to introduce 41 new electric buses to its fleet, in a £20m investment. Since 2021 the company has invested £55m in electric fleets, which makes it a top 3 company in the UK for fleet decarbonisation. In total McGills’ has 109 EV buses, c17% of the company’s fleet and it has plans to continue decarbonising.
SMMT data has shown that the UK car market grew by 26.2% in February, which represents a seventh consecutive month of growth. Zero-emission vehicles maintained their strong upward trend, with PHEVs rising by 1% and BEVs up 18.2%. SMMT maintain their prediction that 488,000 PHEVs and BEVs are expected to join the UK’s roads in 2023. This is based on these continued strong growth figures and that OEMs are bringing more than 40 (new plug-in) electric models to the market.
UK Budget (15th of March) Watchlist
The Spring Budget has come at a crucial time, which if delivered correctly, can help shape the UK’s net zero goal progress and deliver an equitable transition for all. We agree with industry leaders, that the budget should tackle and propose a long-term plan for charging investment, EV tax cuts, aligning VAT on public charging with domestic energy use, and reviewing the Vehicle Excise Duty premium.
Deals Landscape
ON Semiconductor has successfully secured a long-term agreement with BMW AG to support their EVs. ON will supply BMW EV buses with 400-volt DC power modules that can hold several hundred kilowatts of power.
The EU is in the last stages of negotiating with the USA, an in-principle agreement. This deal would grant the EU equivalent status as an American free-trade partner, which would help make (European-made) EVs eligible for tax credits.
Embark, the autonomous trucking company, is cutting 70% of its workforce, with the remaining 30% of workers focussing on winding down operations. The company is running low on capital relative to what is needed to develop and commercialize autonomous vehicle technology. A sale of assets seems to be the priority going forward.
Spotlight: Norway
As highlighted in last week’s newsletter, the USA has over the last 18 months introduced monumental Acts such as the IRA and BIL. The UK Spring Budget is due to be released next week and although we do not expect landmark Acts introduced, we do, however, expect significant policies to be implemented.
Norway is arguably the most successful country in achieving EV market penetration. In 2022 the IEA stated that Norway had the highest European EV sales as a percentage of overall car sales with 86%. We expect this to continue to grow as the Norwegian Government has committed to the end of sales of conventional vehicles in 2025. In 2008 there were c1,200 BEVs, in 2022 the figure has grown to c598,712.
The Norwegian government has done a great job of stimulating demand by implementing forward-thinking policies. Aggressive policies have been set out to make EV ownership less expensive than conventional ICE vehicles. The support Norway provides includes:
- Exemptions from vehicle registration tax for BEVs:
- Norway levies a registration or import tax on cars, which can reach €10,000 or more depending on the car model’s CO2 emissions. BEVs are exempted from the tax and plug-in hybrid electric cars also pay a lower tax.
- Low annual road tax:
- BEVs paid a lower annual road tax until 2020. Instead of c€367, BEV owners pay €52. The annual tax increased to half the rate of fossil-fuelled cars in 2018 and increased to nearly full rate since 2020.
- Exemption from 25% VAT on purchase:
- BEVs were exempted from paying the VAT of 25% on the purchase or leasing rate. This VAT exemption was in place until the end of 2022 and from the 1st of January 2023, a new subsidy scheme has replaced this exemption.
- Other financial benefits:
- Norway has introduced a special E-number plate for EVs, which gives authorities the possibility to use local incentives such as free parking, using bus lanes, and free ferry crossings.
It appears other central governments are learning from Norway’s success. The other countries are trying to replicate Norway’s clear, stable policy framework and political commitment which has been crucial to creating long-term reliable EV market conditions. It will be interesting to see what points the Spring Budget will touch on in the EV value chain