China and the European Union (EU) have finally agreed to hold talks on electric vehicle (EV) tariffs, forestalling the threat of provisional duties in July. EU officials claim that prices for Chinese EVs are kept artificially low through state subsidies. In response, China has accused the EU of protectionism and a breach of international trade rules. The propositions are not mutually exclusive, but whatever compromise is eventually reached is unlikely to reinvigorate waning demand on the continent. Figures from the European Automobile Manufacturers Association show that year-on-year sales of new battery-electric cars in the EU fell by 12 per cent in May, with demand in Germany down by nearly a third. And it’s revealing to note that Zenith Automotive – a private-equity-backed motor leasing group chaired by former M&S chief Lord Rose – has been placed on a debt downgrade watch by ratings agency Moody’s, as concerns mount about the falling second-hand market value of its EV fleet.
Anyone with a passing familiarity with the EV industry will know that the problems aren’t confined to Europe. Last week, Fisker Group, the operating subsidiary of Fisker Inc (US:FSRN), announced that it had filed for Chapter 11 protection in the US. We’ve lost track of the number of EV start-ups that have gone to the wall, but perhaps that’s an unavoidable consequence of trying to establish a brand in a nascent industry which entails large, front-loaded capital demands. After all, dozens of car companies went belly-up in the early part of the 20th century, so it’s always been a risky proposition for investors.