European Auto Finance Insights – May

Was Q1 the calm before the storm? Europe’s automotive industry reported a positive start to the year before the turbulence of international trade tensions with the US delivered wave after wave of uncertainty.

President Trump’s ‘Liberation Day’ tariffs hit Europe’s vehicle manufacturers with a 25% import tariff, with further tariffs on components for vehicles assembled in the US.

The on-off nature of other import duties has left OEMs that export to the US in a perilous situation, although forecasts that the US economy faces a weaker growth trajectory in 2025 hold a glimmer of hope that the US and EU may find a way out of the dispute.

The European passenger car market closed Q1 with registrations of 3.38 million units, almost identical to the same period of 2024. But April did not start so brightly for Germany’s automotive sector, with car production down 7% year-on-year, and exports down 8%.

Comparisons with pre-pandemic 2019 are even more sobering for the heartland of Europe’s car manufacturing, with Germany’s domestic car sales 24% down in the first four months of the year compared to the same period of 2019, and its exports 14% lower.

The European Automobile Manufacturers’ Association (ACEA) is lobbying hard for EU and national government support to help the motor industry pivot more rapidly to electric vehicle technology. It wants to see rapid improvement in Europe’s electricity grids and charging infrastructure, and greater battery production. Social leasing schemes, that subsidise the cost of EVs to low income households, are also high on ACEA’s agenda.

Battery electric cars achieved a 16.9% market share of new registrations in March across 28 European markets, representing the second best month on record, and 23% up year-on-year.

But Tesla, the market leader, saw its sales tumble 30% in March, following declines of -47% in January and -44% in February, as the marque waited for a facelift of its Model Y and wrestled with the political positioning of its owner, Elon Musk.

Meanwhile, ACEA has launched a new interactive tracker to map progress in electric vehicle registrations, infrastructure deployment, existing vehicle stock, charging prices, and market segmentation across both passenger and commercial vehicles.

Diesel continues to dominate commercial vehicle sales in a market that witnessed a 12.2% year-on-year decline in EU new van sales in Q1 and a 16% fall in truck sales. As bellwethers of the economy, the fall in commercial vehicle sales is concerning.

Elsewhere, a series of new joint ventures and partnerships has underlined the essential role of finance in supporting vehicle sales.

Iveco and vendor finance company DLL have created a joint venture aimed at broadening access to low- and zero-emission vehicles through flexible long-term rental solutions in Italy, France and Germany, with plans to expand internationally.

CA Auto Bank has formed a strategic agreement with Chery Finance Service to support the rollout of Chery brands across Europe.

And Europe’s largest vehicle leasing company, Ayvens, has expanded its partnership with BYD into Greece, Hungary, Portugal, Finland, Ireland, Romania, and Sweden.

Ayvens reported year-on-year Q1 increases in operating income, and margins, thanks to a slower normalisation of used car prices OEM. Volkswagen Group Mobility has also enjoyed a good start to the year, with a 4.6% year-on-year improvement in new contracts in Q1 (EVs up by 75.9% in Europe). And Stellantis’s Free2move mobility operation, which incorporates car sharing and subscription-based rentals, has reached profitability, announcing 99% compound annual revenue growth since 2021.