The European automotive industry in general and green lobbyists in particular say affordable electric vehicles are the key to success as sales move from mainly well-heeled first adopters and business buyers to the mass market.
The trouble is, the cheapest prices need to be at least half of the current level of around €25,000 after tax ($27,000), determinedly called “affordable” by industry leaders. It’s ominous for the future health of the European auto industry that Chinese automakers can do even better than that now, with little city cars like the BYD Seagull starting at around €10,200 ($11,000).
According to French auto consultancy Inovev, the Seagull was the eighth best-selling EV in China last year at just under 300,000. The similar little Wuling Bingo sold more than 250,000.
BYD hasn’t responded to questions about importing the Seagull to Europe, but most observers think it won’t be long delayed, given the gap opening up in the market. They say a cooperation deal with an incumbent, struggling European might soften the blow to local carmakers, and make it acceptable to the EU.
You might say that truly affordable doesn’t matter because Europeans are unlikely to embrace cheap and cheerful little Chinese electric buzz boxes. But unfortunately for European industry, the European Union has decreed that internal combustion engines must go and its citizens will buy electric like it or not, and these little Chinese EVs are likely to the only affordable ones. EVs must account for around 80% of new car sales in Europe by 2030 and 100% by 2030.
European manufacturers are starting to worry about the implications if they fail to meet this Chinese competition. That’s not surprising because it’s an existential problem. Can “Airbus for Autos” solve the problem?
News agency Bloomberg was reporting Tuesday that Volkswagen, Renault and Stellantis are looking into the possibility of setting up alliances with what it called “sworn” competitors to fend off this threat. Renault looks particularly endangered by the multi-brands of VW and Stellantis, although it might look to its current provider of cheap electric vehicles Dongfeng Motor Corp of China which has just launched the new Nammi brand.
Renault CEO Luca de Meo wants to see a Europe-wide alliance, an “Airbus of Autos” he called it, which would help share the huge cost of building cheap EVs. Airbus is a pan-European plane-maker set up to compete with Boeing, but which has been accused of using excessive government subsidies. It’s unlikely that Renault’s competitors would be happy about helping to solve its lack of scale.
According to respected forecasters like investment researcher Jefferies, European EV sales will accelerate from 2 million in 2024 to just under 9 million by 2030. Investment bank UBS now predicts 9.6 million EVs in Europe by 2030. Schmidt Automotive Research expects 8.4 million EVs in Western Europe by 2030 for a market share of 60%. This massive surge assumes the imminent emergence of a mass market.
In a report published this week, Brussels-based green advocate Transport and Environment criticized the European industry for being too keen on selling high-price and therefore highly profitable monster electric EVs.
“Carmakers are slowing EV adoption by prioritizing larger more expensive electric cars”, T&E said in the report.
“European carmakers are holding back the mass market adoption of EVs by not bringing affordable models to consumers faster and at volume. The disproportionate focus of manufacturers on large SUVs and premium models means we have too few mass-market cars and too high prices,” said Anna Krajinska, vehicle emissions manager at T&E.
T&E listed upcoming launches for “affordable” EVs including the Fiat e-Panda (€25,000-$27,000), Skoda Elroq (€25,000), Citroen e-C3 (from €23,300), and the Hyundai Casper (€20,000) in 2024. In 2025 comes the Renault Twingo (€20,000-$21,600). The VW ID.2 (€25,000), Opel €25,000, and Renault R5 from €22,000 launch in 2026. The VW ID.1 takes a bow in 2027 at €20,000.
These prices are too high to allow the emergence of a mass market in EVs. EU CO2 regulations have priced out of the market little ICE cars like the Fiat 500, Ford Ka, Citroen C1, Peugeot 108, SEAT Mii, and Renault Twingo, which started at close to €10,000.
The EU must find some way to incentivize the production of cheap urban runabouts, or drastically dilute its CO2 rules. These little cars are likely to have a range of about 100 miles, a top speed of 60 mph, room for 2 adults and 2 children, ideal for shopping, school runs and local commuting. Range anxiety would be a thing of the past because long journeys are clearly not on the cards.
Prices of these upcoming European-made (or procured) EVs are not affordable to Europe’s average wage earners.
“I agree these prices aren’t affordable. An affordable car is a Dacia Sandero (an ICE vehicle) which begins at €11,300 (£12,200) in Germany, or half the prices of those “affordable” EVs, said Matt Schmidt of Schmidt Automotive Research.
Dacia is Renault of France’s value brand, and it sells the Spring EV for close to €20,000 supplied by Dongfeng, before incentives. This is Europe’s cheapest EV.
Schmidt said it is not surprising big European manufacturers are concentrating on premium vehicles because they need to generate funds to make more these affordable mass-market EVs. Much rationalization is needed but he doesn’t expect a truly affordable European EV until 2030.
“We don’t expect truly affordable mass-market models to come to market until the end of the decade. We expect protectionism to create roadblocks for Chinese manufacturers attempting to enter in the meantime and leverage their early advantage domestic scaling advantages,” Schmidt said.
Lobby group EV inFocus disagreed with T&E’s criticism of manufacturers concentrating on big-profit EVs, saying it wasn’t surprising that some consumers wanted more expensive vehicles. In its latest newsletter, EV inFocus said EU rules on efficiency, vehicle tax, and subsidies that penalize weight were required to persuade buyers to seek smaller cars. It acknowledged the difficulty European automakers had competing with the Chinese EV runabouts.
“These cars have, though, started to become available. You can buy fully-electric cars or crossovers from Peugeot, Mini, Opel, Citroen, Hyundai, Kia, Mazda, Jeep, and Honda, as well as from Chinese or Chinese-linked brands such as BYD, MG, Seres, Smart and Volvo,” said EV inFocus’s Peter Ramsay.
None of these would come close to competing on price with the BYD Seagull or Wuling Bingo.
EV sales have surged for about four years, but growth has suddenly stumbled. Ambitious plans from GM and Ford in the U.S. and VW and Mercedes in Europe have been scaled back. As China cranks up its sales assault in Europe, the scene is set for a price war, said Al Bedwell, analyst at GlobalData, which might end up benefitting EV sales.
“The ingredients are in place for some kind of price war. This won’t be on the brutal scale seen in China, where plug-in prices have in some cases, been reduced to parity with ICE, but it will help shift EVs,” Bedwell said.
Bedwell said this will lead to the European introduction of several “affordable” EVs between €20,000 and €25,000, compared with the average price from €40,000 ($43,200). He is optimistic for sales in 2024 although growth has slowed.
If this is the extent of price cuts, then the outlook for European manufacturers will be dire. Could EU tariffs slow Chinese incursions? Given the likelihood of harsh retaliation from China which would devastate German interests there, penal tariff action seems unlikely.
Policy changes in Europe will depend on the EU’s commitment to its CO2 regime. It seems the choice is between hanging on to the ICE ban by 2035, excluding many of its citizens from owning a new car, and bankrupting the mass-market European auto industry. Or allowing China the freedom to supply cheap and cheerful EV town cars which might well do the same, but would at least keep its citizens mobile.
Could the “Airbus for Autos” save the day?