Internal combustion locomotive market in Europe shrinks by one-third in two years, expanding EV and hav ripple power

*This content was translated by AI.

According to data released by the European Automobile Manufacturing Association (ACEA) on the 24th (local time), the size of the internal combustion engine (ICE) vehicle market in Europe has plunged by a third in just two years, marking an unprecedented decline. The prevailing analysis is that this is not a temporary phenomenon caused by a simple economic downturn, but a structural defect caused by the combination of the EU's strong carbon emission regulations and changes in consumers' purchasing patterns.

In particular, the decline in the share of traditional internal combustion engine models represented by gasoline and diesel cars is more evident in the heart of European automobile industries such as Germany and France, which is directly linked to the deterioration of profitability of existing automakers. The background of this rapid decline is the expansion of the ripple power of electric vehicles (EVs) and hybrid vehicles.

The European government's drastic subsidy policy and expansion of charging infrastructure have been crucial for consumers to move away from internal combustion engines and to eco-friendly cars, while aggressive entry into Europe by emerging electric carmakers led by Tesla and Chinese brands is rapidly eroding the market. While existing European brands are struggling with software flaws and supply chain problems, latecomers with advanced software competitiveness have taken the lead in the market. As the "cross-subsidization" strategy, which poured profits from internal combustion engine sales into the development of electric vehicles, was disrupted by the collapse of the internal combustion engine market, even giants such as Volkswagen and Stellantis were forced to consider extreme options of closing factories and reducing manpower.

Even more serious is the fact that these changes in the European market are progressing at an unrivaled pace despite concerns about "temporary demand stagnation." With European countries declaring a ban on the sale of new internal combustion engines in 2035, manufacturers are making every effort to cut costs and make digital transformation to survive. However, tens of thousands of small and medium-sized suppliers who relied on internal combustion engine parts supply chains are on the verge of bankruptcy, casting a dark cloud over the overall local economy.

This is a political and social burden on European countries, where the automobile industry goes beyond simple manufacturing and serves as the backbone of the national economy, and it cannot be ruled out that it will lead to countermeasures such as strengthening protectionism or raising tariff barriers in the future. In the end, the end of the European internal combustion engine market is approaching much faster than expected, signaling a complete reorganization of the paradigm of the global automobile industry.

This sudden change in the European market is expected to have a significant impact on the Korean automobile industry. First of all, crises and opportunities coexist at the same time for domestic automakers such as Hyundai Motor and Kia. As Europe is one of the key markets for Korean automobile exports, a sharp drop in demand for internal combustion locomotives could lead to a short-term hit in export volumes. However, the high-voltage platform (E-GMP)-based electric vehicle lineup, which Korean companies have preemptively built, has an advantage over European brands in terms of price and performance, which can be a golden opportunity to target vacancies. In particular, it is urgent to introduce more aggressive local marketing and high-performance software-mounted models early to absorb the share of Volkswagen and other struggling internal combustion engines.

Harsher changes are expected in the domestic parts industry. First of all, it is clear that companies that produce parts exclusively for internal combustion engines, such as engines and transmissions, will be directly hit. This suggests that there is an urgent need for government-level measures to support soft landing and induce technology conversion to electric parts. On the other hand, the importance of the battery industry will be greater than before due to the strengthening of Europe's carbon neutrality policy. The three South Korean battery companies are facing the task of consolidating their market dominance based on their European production bases. In conclusion, the contraction of the internal combustion engine market in Europe poses a clear task for the Korean automobile industry as a 'speed war of digital and electronic transformation'.

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*This content was translated by AI.