European auto market rises for eight consecutive months: EV share surges to 43%, but Chinese brands capture the incremental growth.

The European auto market accelerated last month, extending this years streak of gains, and with consumers continuing to shift toward electric vehicles, a large share of the incremental growth was captured by Chinese automakers. New-car registrations in September rose 10% to 1.36 million units, the eighth consecutive month of growth, the European Automobile Manufacturers Association said on Thursday. Battery-electric and plug-in hybrid models combined accounted for 43% of total sales, up from 32% a year earlier; battery-powered passenger-car sales nearly doubled in France and Germany, driving the share significantly higher. Since the start of the year, Middle East conflicts have pushed oil prices to new highs, further amplifying the economic advantages of EVs, while incentives in France and Germany are helping to offset the disadvantage of high EV prices. However, the energy shock could also squeeze household disposable spending, dent consumer confidence, or weigh on purchases of big-ticket durable goods. The improving market conditions offer some breathing room for European automakers such as Volkswagen (VWAGY.US). These companies are under pressure: weakening demand in China, trade barriers and domestic cost-cutting pressures are steadily eroding profits. But the electrification transition cuts both ways for them. Per-unit EV profits at Volkswagen, as well as rivals such as Stellantis (STLA.US) and BMW, remain lower than for comparable combustion-engine vehicles, meaning the transition comes with a profitability cost. Meanwhile, BYD Company Limited (01211) and Chery (09973) are stepping up competition in Europes home market. According to industry research data, Chinese brands new-car registrations in Europe have more than doubled so far this year, and institutions expect a large share of the European markets future growth dividend to flow to Chinese automakers. Cherys popular Jaecoo 7 model is one of the breakthrough products, with many consumers choosing between this Chinese SUV and Volkswagens Skoda Elroq. In September, Tesla, Inc. (TSLA.US) deliveries rose 73%, extending its recovery. Among Chinese automakers, Chery led the gains, with sales nearly tripling and its overall European market share nearly doubling to 3.9%. As industry layoffs intensify, struggling traditional European automakers are gaining more policy support. France and Germany have also reached a consensus to jointly lobby the EU to further relax the strict carbon-emissions limits for new combustion-engine cars starting in 2035. The two countries unified stance is also expected to help advance regulatory proposals related to made in Europe to support the local auto industry.