The causes of the auto crisis: the intervention of President Ennio Cascetta

Published 6 March 2025

Here is the intervention on the car crisis by the President of the Transport Cluster, Ennio Cascetta, published on Staffetta Online:

We can define the crisis that is shaking the car industry in Italy and Europe as the perfect storm, the result of a set of factors, only some predictable, that overall put a strain not only on a strategic industrial sector, but also on the quality of mobility and the decarbonization path of one of the hard to abate sectors. It would be truly desirable if, in defining the intervention perspectives, the European Commission started from a structural analysis of the factors that has determined this situation.

Reading for the Italian market can be a starting point

The car market, in Italy, has gone from 2 million new registrations in the pre-covid period to one and a half million in recent years. The cars that are sold are larger (and heavier) with SUVs that now make up more than half of the market. The car market in Italy has indeed evolved towards electrification but with “mild” hybrid cars, i.e. cars equipped with a thermal engine supported by a small electric engine and not rechargeable. On the contrary, pure electric cars, the so-called BEVs (Battery Electric Vehicles) and Plug-in rechargeable hybrids, are struggling a lot, which together are steadily around 4% of new registrations.

Similar trends are found in Europe, even if the share of pure electric vehicles is much higher than the Italian one, on average 15%, but in any case far from the optimistic market forecasts of the early 2020s, and the related commitments of manufacturers, many of whom had committed (and invested) to produce only BEV cars in Europe by 2030.

Crisis: costs and disposable income of families
Today, cars cost much more than 10 years ago and at the same time, the disposable income of Italian families has unfortunately decreased in real values ​​by 5%. The decline in average disposable income is amplified by the increase in inequality. On average, families with low and very low incomes have increased and those with high incomes have increased to the detriment of the middle income brackets. In light of this, in ten years the average price of registered vehicles has gone from around 19 thousand euros to around 30 thousand. In 2019, manufacturers offered 58 models at a price below 15,000 euros, today only 2. The Fiat Panda, the best-selling car in Italy, cost less than 10 thousand euros in 2015, today it costs 16 thousand.

The price of fuel and electricity has also increased. In 2024, a litre of petrol cost an average of 30 cents more than 10 years ago and electricity in Italy has one of the highest costs in Europe. This is a serious handicap for pure electric vehicles, which on average cost a third more than equivalent internal combustion models, but they entail a saving in terms of energy that compensates for the higher cost, only if electricity is purchased with domestic contracts and if annual mileage is well above average.

For a medium-displacement car, even with over 20,000 km of mileage per year, there is no saving on the total cost of purchase + operation if electricity is purchased only from the charging station.

The limited diffusion of electric is therefore not only a problem of scarcity of charging stations (the ratio of electric cars/charging stations in Italy is comparable if not better than that of many European countries), but it is a question of energy cost and type of home.

If fewer new cars are sold and it is more expensive to use them, we should see a decrease in Italians’ car use. This is not the case. Highway traffic in 2024 reached its highest level ever, gasoline and diesel sold in Italy in 2024 exceeded 2019 values. This is also not surprising.

The percentage of people who travel by car instead of public transportation increases significantly as income and the size of the urban center of residence decrease. Those with lower incomes tend to live in neighborhoods and municipalities where public transportation services are weak or completely absent.

So how do you reconcile a market that sells fewer new cars with an increasing demand for mobility?
With the third unknown in the equation: the used car market. In the last year, almost 3 million changes of ownership have taken place (about double the registrations) even if the prices of used cars have also increased, a good 40% more than in 2019. In short, poorer families and higher prices for new cars push people to buy used cars, even very old ones. Half of the changes of ownership are now for cars over 10 years old and the average age of the fleet in circulation in Italy has grown enormously, from 8 years in 2010 to almost 13 years in 2024.

We drive older cars that pollute more and are less safe because they do not benefit from all the technological developments that have been adopted by law on all new-generation cars. At the same time, the European automotive industry is in crisis because it sells fewer cars, has relocated the production of internal combustion cars and fears growing competition from Chinese manufacturers who are able to offer cars of ever-better quality at prices that without duties would be even more competitive than they are today.

There are several hypotheses about the causes of this crisis, probably competing ones.

The two crises of Covid and the war in Ukraine certainly played a role, leading to an increase in the cost of raw materials and energy. The European Union’s forcing of the transition to all-electric probably had an impact, without taking into account the costs and time needed to adapt to this transition by both the industry and consumers.

Nor has the proliferation of constantly evolving rules, dates and limits that only generate uncertainty for both manufacturers and consumers helped. Perhaps the industrial choices of car manufacturers that focused on larger and more expensive models in search of greater profit margins, almost completely abandoning the segments of city cars and medium-sized sedans at more accessible prices, had an impact.

It is no coincidence that Luca De Meo, CEO of Renault, in an open letter written in view of the 2024 European elections asked to “encourage cooperation projects between manufacturers to develop and market affordable small cars and vans produced in Europe”.

The fact is that it will not be easy to reverse the vicious circle in which we find ourselves without structurally rethinking the entire policy of emissions limits, incentives and purchase subsidies especially for the economically weaker groups, duties and, last but not least, the promotion of more sustainable consumer behavior towards the purchase and use of cars of smaller weight and size because the axiom that “the most sustainable energy is that which is not consumed” always remains valid.