As part of their push for net-zero carbon emissions, many Western governments have announced they will be effectively phasing out the production of petrol and diesel cars. In the UK, the government has outlined a requirement that by 2030, 80 per cent of all new cars and vans sold in the country must be electric, rising to 100 per cent by 2035. The EU has approved similar measures, outlawing the sale of combustion engine cars beyond 2035 excluding those which run on synthetic fuels.

These governmental edicts were heralded as helping to drive green investment while reducing the consumption of fossil fuels. In 2023, then Transport Secretary in the UK government Mark Harper said this route to net zero was ‘proportionate, pragmatic and realistic.’

However, across the EU, there are only 4.5 million battery-only electric cars, compared to more than 250 million combustion engine cars, according to data from the European Commission. The picture is similar in the UK, where just 1.2 million, or less than 4 per cent of all cars are electric.

The transition from combustion engine cars to EVs involves overcoming some major barriers – particularly in such a short space of time. Installing EV charging stations across the EU would cost an estimated 250 billion Euros. With Western governments cash-strapped, the burden would likely fall to consumers, if they can afford home charging points or private companies. However, with such a small take-up of EVs, the incentive for a company to invest heavily in the technology remains limited.

Perhaps most importantly, drivers have to buy in, literally and figuratively, to the change. And that means paying more for a car at a time when many have less money in their pockets. An apparent silver bullet might be importing electric cars from abroad – specifically China where the state-backed carmaker BYD is rivalling Tesla as the world’s biggest electric car company.

While simply importing cheaper cars might appear to be a silver bullet – the EU and UK do not have any appetite to cede more of their manufacturing base to China and as a result, are, along with the US, actively fighting the importing of Chinese cars with large tariff barriers. With no clear way forward, the EV rollout now appears to have stalled.

EU hits Chinese EVs with tariffs

The EV rollout is made more challenging by two competing interests. Those are the importance of making EVs more affordable for consumers, and the desire of countries charging ahead with EVs to ensure the new technology creates jobs at home, rather than abroad.

It would appear this second interest has won out among lawmakers after the EU voted to impose tariffs of 45 per cent on imported electric cars from China, effectively blocking them from accessing their over 500 million strong common market. The moves met resistance from some German car manufacturers, amid fears that the Chinese could respond with retaliatory tariffs.

The BBC reported the fresh row over EV sales came as registrations of the batter-powered cars slumped by 43.9 per cent in August compared to the previous year, and that in the UK major car companies had written to the new Labour Chancellor to say they were unlikely to meet the targets which had been set out for them.

BMW, Ford, and Nissan were among the automakers raising their concerns with the government, fearing they might be hit with heavy fines if they fail to transition to EVs in time. As signatories to an open letter from the SMMT, they said:

“Technology transformation is seldom smooth. When the mandate was conceived, the expectation was for steady economic growth, ever cheaper batteries, plentiful raw materials and critical minerals, cheap energy, low interest rates, growing demand. The past couple of years, with all that has happened globally and locally, have proven those assumptions to be flawed.

“As a result, ZEVs remain stubbornly more expensive and consumers are wary of investing. A lack of confidence in the UK’s charging provision is another major barrier. Despite unprecedented manufacturer investment – both in product and market support (some £2 billion this year in customer offers) – the market is not moving quickly enough. People are holding off such that the average age of a car on the UK’s roads has risen from eight to over nine years old. That is bad for the industry, bad for government, bad for the environment.”

That ‘slow-moving market’ now looks set to become inert, with consumers looking to set to pay even more if they want to go green. And although shares in Renault and Volkswagen rose after the tariffs were announced, with French automakers largely welcoming the EU’s stance, the Chief Executive of BMW described the move as a ‘fatal signal for the European automotive industry.’

Electric car demand slumps

In the UK fewer people are now planning to replace their current combustion engine cars with an electric alternative than they were last year. As per a recent report in The Telegraph, just 13 per cent of UK drivers plan to buy an electric car next time – down from 16 per cent last year, and 19 per cent who said they’d buy electric in 2022.

The outlet reported that falling fuel prices had dampened the long-term incentive to buy a battery-powered car, namely the low running costs:

“Rising electricity rates and falling fuel prices have meant that motorists who rely exclusively on public charging networks now pay up to twice as much per mile as those in petrol cars.

“Labour has promised to reinstate a 2030 ban on sale of petrol-powered cars, but sales of EVs are already well behind government targets.

“It comes as a new poll finds that half of Britons say they do not ever intend to buy an EV…

“High costs were the biggest reason, the survey said, followed by a lack of charging infrastructure, range concerns and the time it takes to charge.”

A similar picture is emerging in Germany, where the country’s stalling EV production could set its transition target date back five years, according to the German newspaper Die Welt. They reported that:

“Germany’s car industry is struggling with high investment costs and low demand for electric cars. The automotive industry is a central pillar of the German economy and directly employs hundreds of thousands of people in the country. The shift to electric mobility is shaking up longstanding industry networks and production practices centred on combustion engines.”

Is now a good time to invest in Tesla?

With Chinese electric cars being blocked from Western markets, and European automakers struggling to meet demand, might there now be an opportunity with Tesla?

Although the American car company recently saw a hiccup in its stock price after failing to meet its quarterly delivery targets, observers think there are plenty of good reasons to be optimistic about Tesla. Many investors are excited about its so-called rob taxi service, which we are set to hear more about later this month.

Elon Musk believes Tesla could produce an entire fleet of self-driving taxis, and if he’s right, this could mean a big boost to his company’s share price. While sceptics believe any venture of this kind remains years away from becoming profitable – some estimates say the autonomous taxi industry could generate $1.3 trillion in revenue by 2030.

According to preliminary reports, the rob taxi could be cheaper than a bus ticket, while picking you up straight from your door or while you’re out and about. Musk envisages that a taxi firm could simply dispatch a self-driving cab to their customers with the touch of a button – saving enormous amounts of money on labour.

Investors appear to be adopting a cautious approach ahead of the October 10 reveal, when we will learn more about the robo taxi. But while observers have long questioned Tesla’s fundamentals, its AI technology and the many possible applications of its self-driving technology means there is plenty to be positive about. Writing for The Times, Alex Sebastian highlighted how Tesla’s kingpin status puts it in good stead to capitalise on the autonomous revolution:

“Tesla has proven itself to be ahead of the rest of the car industry in the key fields of battery technology and AI-powered automation.

“The long-established automotive giants around the world were left behind during Tesla’s early years. While they have caught up significantly in terms of their electric vehicle development, rival car makers are yet to prove they can innovate at anything like the rate Tesla has.

 “A related long-term positive is the global energy transition expected to play out over coming decades. With much of the world committed to reducing carbon output and eventually reaching net zero, electric vehicles have a growing role.”

Where will EVs be in ten years?

Despite ambitious targets set by governments to transition to EVs by 2030-2035, the high cost of cars, insufficient charging infrastructure, and falling consumer demand present major challenges. The introduction of tariffs on cheaper Chinese EVs adds further complications, as Western nations prioritize protecting local jobs over reducing costs for consumers.

Automakers are expressing concerns about meeting targets, with some calling for more realistic timelines and support from governments. While Tesla looks to be in a strong position, European carmakers look way behind with EV production. For now, the transition remains a challenge, and the future of the EV market looks increasingly uncertain.