Just three years ago, one carmaker after another made bold proclamations about transitioning entirely to electric vehicles. Alfa Romeo aimed for 2027, and Jaguar even set 2025 as their target (but Jaguar has still only one electric car on the list). Fast forward to today, however, and many of these manufacturers are walking back those ambitious plans.
They are now announcing that ICE vehicles—mostly hybrids—will continue to play a significant role in their future lineups. This shift in strategy not only reflects changing market conditions but also exposes the superficiality of some early ethical claims about sustainability.
Carmakers and their strategies
The latest company to make headlines for revising its EV plans is Volvo, an unexpected move given the brand’s longstanding commitment to electric mobility. In 2020, Volvo revealed the fully electric XC40 Recharge (now EX40) and declared its intent to make EVs its volume leaders.
A year later, during the unveil og the C40 Recharge (now EC40) the company pledged to sell only electric cars by 2030 and have at least 50% of its production fully electric by 2025. Yet, despite a 47% increase in EV sales in Europe as of August 2024, Volvo’s CEO Jim Rowan recently confirmed that hybrids, especially plug-in variants, will continue to be a major part of the lineup beyond 2030.
Volvo is not alone in this backtrack. Ford, which had announced in 2021 that it would sell only EVs by 2030, reversed course just months ago. Unlike Volvo, Ford is facing greater difficulties. By focusing heavily on EVs, Ford has essentially abandoned key models like the Fiesta and has shifted towards more premium vehicles, leaving behind its once-large base of budget-conscious consumers. The need to return to producing affordable city cars is a key driver behind Ford’s decision to keep hybrids in its future lineup.
Fiat also recently adjusted its ambitious plans. Originally aiming to produce only EVs by 2027, the Italian carmaker has seen sales of its 500e falter and its 600e struggle to gain traction. As a result, Fiat announced a hybrid version of the 500e to be released by 2026, while extending the life of the current Panda alongside the new electric Grande Panda until at least 2029.
Volkswagen, perhaps the most prominent German carmaker, is undergoing the most dramatic reversal. The company is not only scaling back its EV plans but is also facing a severe financial crisis. For the first time in its 87-year history, Volkswagen has even threatened to close two of its factories.
The German market slumps
The widespread retreat from EV-only strategies underscores the fragility of the European auto market, particularly in Germany. Electric vehicle sales in the country have plummeted by 37% year-over-year, sending shockwaves through the industry.
Even Tesla, which has seen substantial growth globally, has experienced a 15% decline in Europe in 2024. While electric vehicle sales are booming in smaller markets like Denmark and maintaining steady growth in France and the UK, these gains are not sufficient to offset the massive downturn in Germany.
The German economic downturn has compounded the problem. High inflation, rising energy costs, and political instability have made it difficult for German consumers to afford new electric vehicles. The government’s decision to cut subsidies for EVs further exposed the fact that many of the sales in Germany were largely driven by state incentives. With those subsidies gone, the market has shrunk dramatically.
Missteps by automakers
Automakers bear much of the blame for the current situation. While some have struggled to produce affordable mass-market EVs, others have focused too heavily on premium segments, saturating the market with high-end electric SUVs and luxury sedans. Ford, Volkswagen, and even brands like Skoda have made the mistake of shifting their focus from affordable, practical cars to more expensive offerings, alienating a large portion of their traditional customer base.
For example, Fiat’s 500e initially had a promising launch in 2020, even outperforming Volkswagen’s ID.3 in Germany for a period. However, by 2023, its high price tag became a significant barrier, especially after the government cut EV incentives. To address this, Fiat is now working on a hybrid version of the 500e and a more affordable entry-level electric version, both expected in 2026.
A gift for Chinese automakers?
The missteps of European automakers have opened the door for Chinese brands like BYD and MG to gain ground. With models like the BYD Dolphin and MG4 priced significantly lower than European competitors like the Volkswagen ID.3, these brands are becoming more attractive to budget-conscious consumers. However, the recent imposition of tariffs on Chinese-made vehicles by the European Union has complicated matters. These tariffs have already forced Chinese manufacturers to raise prices, but they also threaten to make European-made EVs even more expensive.
Ironically, the tariffs may also hurt European brands that produce vehicles in China. For instance, Volvo’s successful EX30, which has helped drive the brand’s growth, is currently manufactured in China, and the new tariffs could result in price increases. Tesla’s Model 3, also manufactured in Shanghai, is similarly affected.
Government policy changes
In addition to the challenges faced by automakers, European governments are starting to pull back from their own aggressive EV targets. Germany has secured an exemption for e-fuels in the EU’s 2035 ban on new combustion engine vehicles, much to the delight of domestic automakers.
In Italy, political pressure is mounting to push for a similar exemption or even a complete repeal of the 2035 deadline. This change in policy could further slow the shift to electric mobility, creating uncertainty for automakers and consumers alike.
