Categories: Environment

Electric cars: the race for inexpensive models is on

Despite attractive subsidies, electric and European cars remain expensive, even if some interesting models are coming.

The European automotive industry is at a crucial turning point in its history. Faced with the rise of electric mobility, European manufacturers are faced with a major challenge: make electric cars accessible to the general public while preserving their competitiveness against Chinese competition.

Europe has long escaped the cheap Chinese competition which has already wreaked havoc in other sectors such as the textile industry or smartphones. However, the automobile is no longer spared, as evidenced by the strong presence of China at this year’s Munich Motor Show.

A new price war to come?

China, a pioneer in electrification for nearly a decade, now combines a significant technological advance with a competitive labor cost, particularly in its own market. This is true a little less in Europe on certain models, due to taxes in particular.

European governments also have their part to play in this complex equation. They urge manufacturers on the continent to make electric mobility accessible, anticipating a gradual ban on new thermal or hybrid vehicles by 2035.

The question of prices remains crucial. In China, “Electric cars are often sold at up to 60% lower prices than in Germany”, according to automotive industry expert Ferdinand Dudenhöffer. This cost difference is a serious challenge for European manufacturers.

MG, which went under the Chinese flag in 2007 via SAIC, offers advantageous prices, around 30,000 euros excluding environmental bonuses for its entry-level models. The manufacturer benefits from the reputation of an old Western brand and the competitiveness of the Chinese market.

Chinese brands have gained ground in Western Europe, with “8% market share in the electric car sector in the first half of this year, while they were almost absent in 2019”, according to analyst Matthias Schmidt. BYD, China’s leading electric car maker, is expected to step up its presence in the European market from the second half of 2023.

What are European manufacturers preparing?

Faced with this fierce competition, European manufacturers are trying to reduce their production costs and offer more affordable electric models. Even brands like Mercedes, which have traditionally focused on the premium segment, are committed to making electric “accessible”.

Volkswagen has announced an ID.2 for less than 25,000 euros expected in 2025and a version under 20,000 euros in 2027. Stellantis is betting on the electric Citroën C3, while Renault will launch the R5 city car at a price below 30,000 euros, after having revised its price estimates, since the Losange announced less than 25,000 euros a few months ago.

The objective is clear: “the more electric models there are, the greater the economies of scale, which should help reduce prices”explained the boss of Volkswagen, Oliver Blume.

However, the transition to affordable electric cars promises to be complex, in particular “due to an economic slowdown that could lead to a 12% decline in electric car market share in September”Selon Ferdinand Dudenhöffer.

Europe prepares its weapons

In France, the government is considering an “affordable price” electric car rental offer, with a target of 100 euros per month subject to means testing. France is also exploring mechanisms to favor national electric vehicles by using an “environmental score” for subsidies. This specific bonus should come into force in 2024.

In Germany, where Volkswagen, BMW and Mercedes reign supreme, purchase bonuses are no longer seen as a sustainable solution. The government has reduced the ecological bonus this year and plans to phase it out by 2025, to encourage manufacturers to market more affordable electric vehicles.

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