Europe needs truly affordable EVs, and China has an inside track

The European car industry in general, and green lobbyists in particular, argue that affordable electric vehicles are the key to success as sales shift from primarily wealthy first adopters and business buyers to the mass market.

The problem is that the cheapest price would need to be at least half the current level of around 25,000 euros (about $27,000) after tax, which industry leaders categorically call “affordable.” With prices starting at around 10,200 euros (about $11,000) for small city cars like the BYD Seagull, the future health of the European auto industry means that Chinese automakers can do even better than they are today. It’s creepy for sex.

According to French automotive consultancy Innovev, the Seagull was the eighth best-selling EV in China last year with just under 300,000 units sold. A similar smaller version of Wuling Bingo sold more than 250,000 units.

BYD did not respond to questions about the Seagull’s import into Europe, but given the gap that is opening up in the market, most observers believe it won’t be delayed much. They argue that cooperation deals with existing struggling European countries could soften the blow for local automakers and make them more acceptable to the EU.

Some might say that being truly affordable isn’t important, since Europeans are unlikely to accept a cheap and cheerful Chinese-made small electronic buzzbox. Unfortunately for European industry, however, the European Union has decreed that internal combustion engines will be phased out and its citizens will buy electric cars whether they like it or not, and affordable EVs are There is a high possibility that it will only be a small EV made in China. EVs should account for around 80% of new car sales in Europe by 2030, and 100% by 2030.

European manufacturers are beginning to worry about the impact of losing this competition with China. It’s not surprising because it’s an existential question. Can “Airbus for cars” solve the problem?

News agency Bloomberg reported on Tuesday that Volkswagen, Renault and Stellantis are considering the possibility of partnering with “sworn” competitors to fend off this threat. Renault may look to China’s Dongfeng Motor Group, its current provider of cheap electric cars, which has just launched its new Nammi brand, but is particularly at risk from the VW and Stellantis multi-brands. looks like.

Renault Chief Executive Luca de Meo wants a European-wide alliance, which he calls the “Airbus of cars”, to share the huge costs of producing cheap electric vehicles. Airbus is a pan-European aircraft manufacturer set up to compete with Boeing, but has been accused of using excessive government subsidies. It is unlikely that Renault’s competitors would be willing to help Renault solve its lack of scale.

According to prominent forecasters such as investment researcher Jefferies, European EV sales will accelerate from 2 million in 2024 to just under 9 million by 2030. Investment bank UBS currently predicts that there will be 9.6 million EVs in Europe by 2030. Schmidt Automotive Research predicts that 8.4 million EVs will be sold in Western Europe. By 2030 he will raise the market share to 60%. This massive surge presupposes the imminent emergence of a mass market.

In a report published this week, the Brussels-based environmental group Transport and Environment criticized European industry for being too eager to sell monster electric vehicles at high prices and high profits.

“Car manufacturers are slowing the adoption of EVs by prioritizing larger, more expensive electric vehicles,” T&E said in the report.

“European automakers are holding back the mass market adoption of EVs by not offering affordable models to consumers quickly and in large numbers. That means there are too few cars for the masses and too expensive,” said Anna Krazynska, T&E’s vehicle emissions manager.

In 2024, T&E will launch Fiat e-Panda (€25,000 – $27,000), Skoda Elroc (€25,000), Citroën e-C3 (€23,300 -), Hyundai Casper (€20,000). ) and other “affordable” EVs. In 2025, the Renault Twingo (20,000 euros to $21,600) will be introduced. VW ID.2 (25,000 euros), Opel 25,000 euros and Renault R5 will be launched in 2026 from 22,000 euros. VW ID.1 will end in 2027 at 20,000 euros.

These prices are too high to allow the emergence of a mass market for EVs. Due to EU CO2 regulations, small ICE cars such as the Fiat 500, Ford Ka, Citroen C1, Peugeot 108, SEAT Mii and Renault Twingo are priced from close to €10,000.

The EU needs to find some way to encourage the production of cheap urban runabouts or significantly relax its CO2 regulations. These little cars have a range of around 160 miles, a top speed of 100 km/h, and space for two adults and two children, making them ideal for shopping, school, and local commuting. Long journeys are obviously not expected, so range anxiety will be a thing of the past.

The prices of these future EVs manufactured (or sourced) in Europe will not be affordable to the average European wage earner.

“I agree that this price is not affordable. According to Matt Schmidt of Schmidt Automotive Research, the most affordable car is the Dacia Sandero (ICE car), which costs 11,300 euros in Germany. (from £12,200), or half the price of an “affordable” EV.

Dacia is French value brand Renault and sells the Spring EV, supplied by Dongfeng, for nearly 20,000 euros excluding incentives. This is the cheapest EV in Europe.

Schmidt said it’s not surprising that major European manufacturers would focus on luxury cars, as they need to generate funds to build more of these affordable mass-market EVs. A lot of rationalization is needed, but he doesn’t expect to see truly affordable EVs in Europe until 2030.

“We don’t think we’ll see truly affordable mass-market models hit the market until the end of the 2010s. In the meantime, Chinese manufacturers will step in and take advantage of their early stage advantage on domestic scale. “We expect protectionism to be an obstacle for manufacturers that are in the market,” Schmidt said.

Lobby group EV inFocus disagreed with T&E’s criticism of manufacturers focusing on high-margin EVs, saying it was not surprising that some consumers wanted more expensive cars. Ta. EV inFocus said in its latest newsletter that EU rules on efficiency, road tax and weight-penalizing subsidies are needed to persuade buyers to go for smaller cars. European automakers have admitted that it will be difficult to compete with China’s runabout EVs.

“But these cars are starting to become available. All-electric cars and crossovers from Peugeot, Mini, Opel, Citroen, Hyundai, Kia, Mazda, Jeep, Honda, as well as BYD, MG, Ceres, Smart, You can also buy from China or China-related brands such as Volvo,” said Peter Ramsay of EV inFocus.

None of these can compete on price with BYD Seagull or Wuling Bingo.

Sales of EVs have been rapidly increasing for the past four years, but the growth has suddenly slowed down. Ambitious plans for GM and Ford in the US and VW and Mercedes in Europe have been scaled back. GlobalData analyst Al Bedwell said China is poised for a price war as it ramps up sales in Europe, which could ultimately benefit EV sales.

“The ingredients are in place for some kind of price war. This isn’t on the brutal scale we’re seeing in China, where plug-in prices have been slashed to parity with ICEs in some cases, but it’s going to drive the transition to EVs. “It will facilitate,” Bedwell said.

Bedwell said this will bring some “affordable” EVs to Europe, with average prices starting at 40,000 euros ($43,200), compared to 20,000 to 25,000 euros. said it would be. Although growth has slowed, he is optimistic about sales in 2024.

If prices fall to this extent, the outlook for European manufacturers will be dire. Can EU tariffs slow Chinese encroachment? Punitive tariffs seem unlikely, given that severe retaliation from China could harm Germany’s interests.

Policy changes in Europe will depend on the EU’s commitment to the CO2 regime. The choice appears to be to either abide by the ICE ban by 2035, which excludes large swaths of the population from owning new cars, or bankrupt Europe’s mass-market car industry. Alternatively, allowing China a free supply of cheap and cheerful EV Town Cars would probably do the same thing, but at least it would keep its people mobile.

Can an “automotive Airbus” save the day?