Changjiang Securities released a research report stating that fiscal and tax policies to support new energy vehicle subsidies have driven sales and penetration rates in the European market to soar, as sales trends resonate with preferential policies. Mainstream countries in Europe have intensively launched tax incentives and subsidy policies for new energy vehicles, promoting the acceleration of electrification in Europe. Since 2023, many European countries have tightened their policies on subsidies for new energy vehicles, and the growth rate of sales of new energy vehicles in Europe has slowed significantly due to the impact of rising raw material prices, among other factors. This year, the European car market is still affected by subsidy cuts and macro environment impact.

Viewing the European new energy vehicle market from the perspective of subsidy and fiscal policies

Fiscal and tax policies supporting new energy vehicle subsidies have driven sales and penetration rates in the European market to soar, as sales trends resonate with preferential policies. In 2020, there have been significant changes in the structure of the European automotive market, with new energy vehicle sales of about 1.261 million units, a year-on-year increase of 126.3%, and a penetration rate of 8.2%, up 5.4 percentage points year-on-year. From the perspective of policy reasons, mainstream countries in Europe have intensively launched tax incentives and subsidy policies for new energy vehicles, promoting the acceleration of electrification in Europe. Since 2023, many European countries have tightened their policies on subsidies for new energy vehicles, and the growth rate of sales of new energy vehicles in Europe has slowed significantly due to the impact of rising raw material prices, among other factors. This year, the European car market is still affected by subsidy cuts and macro environment impact. The cumulative sales of new energy vehicles in seven European countries in the first half of this year were 1.007 million units, basically flat year-on-year, with a single-month sales of 0.213 million units in June, a year-on-year decline of 4%, and a penetration rate of 22%, down 1.7 percentage points year-on-year. It can be seen from this that the impact of subsidy cuts and policy changes on European consumers is direct. At this point, Changjiang Securities sorted out the current subsidy incentives and tax preferences for new energy vehicles in various European countries.

Subsidy incentives: Accelerating the process of subsidy cutbacks and still awaiting digestion of impacts.

As of 2024, 19 of the 27 EU member states have provided financial support for new energy vehicles, and only 8 countries, such as Belgium, Bulgaria, Denmark, Finland, Germany, Sweden, Latvia, and Slovakia, have not directly provided purchasing incentives for new energy vehicles, while the UK has cancelled the subsidy policy in 2022. However, these countries also generally have tax breaks. From the perspective of subsidy processes, eight mainstream countries in the European region, such as Germany, the UK, and Sweden, have completely canceled subsidy incentives for new energy passenger vehicles, mainly due to factors such as macro environment, financial pressure, subsidy orientation changes, and changes in consumer environment, among others. Excluding countries that have completely cut subsidies, mainstream countries are still in the process of reducing subsidies, with a reduction range of 500-1500 euros. Although the overall reduction is not significant, the requirements for price range are becoming tighter, such as in France, the Netherlands, Hungary, and other countries. However, not all countries are in the process of reduction, and Italy raised the amount of subsidies for new energy vehicles within the year. Spain, Portugal, and Austria have not adjusted the amount of subsidies for value-added taxes, etc.

Tax preferences: Wide range of subsidies and sufficient preferential policies.

In addition to direct purchase subsidies, preferential policies for electric vehicles in European countries also include registration taxes, ownership taxes, value-added tax exemptions, and other policies, covering all aspects of taxation for new energy vehicles, car purchase, company car use, and charging facilities. Under the trend of subsidy reductions in European countries, preferential tax breaks and exemptions are still expected to promote the economic feasibility of initial electric vehicle purchases. From the perspective of the reduction pace, on the one hand, the tax policies of Germany, France, and the UK have a slightly faster pace of reduction, and are basically expected to end the reduction process in about 1-3 years, which may stimulate some demand pre-positioning before the reduction, and subsequently further stimulate demand for cost-effective models. On the other hand, many countries still have not disclosed their reduction plans for tax preferential treatments, and some countries, such as Italy, Portugal, Hungary, Iceland, and Austria, implement full or partial exemptions for ownership taxes on EV models, while Portugal and Austria offer preferential tax breaks, such as for value-added taxes, etc.

Risk warning

1. Industry demand is lower than expected;

2. Increased market competition risk.