The European automotive industry's steel demand is increasingly tied to the future of electric vehicle (EV) sales, as the region aims to phase out internal combustion engine cars by 2035. Despite a 4.4% increase in new car registrations during Q1 2024, March saw a 5.2% decline, with drops in major markets like Germany, Spain, Italy, and France.
Steel orders from the automotive sector are reportedly down 10-20% year-over-year, according to MEPS International's European Steel Review. The elevated cost of borrowing has contributed to softening EV demand, with EV registrations declining 11.3% year-on-year in March.
The growing threat of imported Chinese EVs is a concern for the European automotive sector's productivity and steel demand. Chinese-built car sales in Europe rose 45% in 2023, capturing 4% market share, and could reach 15% by 2025. The European Commission is investigating the impact of Chinese EV imports and may announce provisional measures like tariffs or quotas by July 4, though European carmakers are nervous about their introduction.
The automotive sector accounts for around 17% of European steel consumption, and carmakers are a crucial market for steelmakers' green steel products as they transition to net zero by 2050. However, the EU's Carbon Border Adjustment Mechanism (CBAM) does not protect against finished products like cars, potentially giving Chinese imports a price advantage from cheaper steel production. New duties aimed at leveling the playing field could be key to sustaining steel demand from Europe's carmakers in the long run.
