The entire EV world looks at Europe as the "holy grail" of electric vehicles - since the continent is buying EVs at a record pace. But that euphoria, fueled by subsidies and dozens of new choices, may be short-lived. Europe's share of global EV sales doubled to 43% last year, while at the same time China and the U.S. saw market share decline, the Wall Street Journal reports. 

Plug-in EV sales in Europe were up 137% to 1.4 million vehicles last year, blowing past China's 12% increase to 1.3 million sales. In the U.S., sales rose just 4%. 

But these sales have been helped along by government incentives and analysts are starting to warn that the momentum could be short-lived when the subsidies dry up. Without government incentives, EVs become "considerably more expensive" than traditional ICE vehicles. 

Arndt Ellinghorst, auto analyst at Bernstein Research, told the Journal: “The market is extremely sensitive to government and company discounts. Once subsidies are taken away EV sales will collapse by 30-40% at least for one or two quarters.”

The surge was also helped along by the tailwind of The European Union tightening emission requirements. When Covid became an issue, governments targeted their aid to companies at the forefront of battling climate change. Naturally, this meant incentives to purchase EVs. 

Hakan Samuelsson, chief executive of Volvo Cars, said: “We have an incentive to build these cars…It helps make the EV very attractive for the consumer. But long term these incentives and tax breaks are not sustainable.”

Choice has also been expanding for Europe. Models like the VW ID.3 and ID.4 were rolled out last year, in addition to BMW, Mercedes, and Audi all launching high-end EVs. There were about 65 new models total launched in Europe last year. This is twice as many as were launched in China. This year, 99 new models are slated to be released. 

Britta Seeger, board member at Daimler AG, said it was a perfect storm for EV companies: “You have to have the right product on offer…That’s what we saw last year in Europe. The offer is better, and subsidies are supporting sales.”

Hallgeir Langeland, a 65-year-old Norwegian environmentalist, and former politician bought his first car in 25 years when Ford released its EV Mustang, stating: “I had to have it. It’s cherry red.”

Christian Burg, who formerly drove a diesel BMW, also took the opportunity to switch: “We received 3,750 euros [equivalent to $4,500] in cash incentives.”