China could seize the European mass market for electric cars unless the EU acts

The European market for small electric cars will be dominated by China unless the European Union (EU) takes swift action to enable manufacturers to cost-effectively supply inexpensive vehicles for the mass market, according to a report from the JATO Dynamics consulting firm.

The electric car market has accelerated rapidly over the past two years in Europe, but from a very weak base. Sales of electric vehicles in the first half of the year in Western Europe were 483,304, an increase of 124% from the first half of 2020, according to Schmidt Automotive Research. But the market share was just over 4%. These sales are mostly high-end and very expensive vehicles, while entry-level small electric cars are still perhaps 3 times more expensive than internal combustion engine (ICE) equivalents.

Sales are also heavily dependent on state subsidies, with German taxpayer aid reaching nearly $ 12,000, although this does not apply to luxury cars.

The pricing of electric cars has moved in the opposite direction in Europe and the United States compared to China.

“While the price of electric vehicles in China has dropped significantly by 47% since 2011, the US and European markets have seen prices for electric vehicles increase by 38% and 28% respectively during the same period,” the report said. .

“Today, Chinese consumers can buy a brand new electric vehicle for as little as € 3,700 ($ 4,400). In contrast, the average retail price of an electric vehicle in the United States continues to rise faster than any other major global market and now stands at € 36,000 ($ 42,800), up from € 26,200. ($ 31,000) ”, according to the report, titled“ EV’s: A Pricing Challenge ”.

The average retail price of an EV in Britain is 52% higher than the average ICE price. In Germany, the average retail price of electric vehicles is € 39,755 ($ 47,000).

Today’s electric cars in Europe are mostly overpriced city cars. They’re too expensive for the average earner and disappointed with low long-range capabilities that can be easily overshadowed by the cheapest gasoline or diesel vehicle. Therefore, they depend heavily on subsidies to move the metal. The electric car revolution is in desperate need of affordable vehicles that will sell on their merits, like utility and price.

The report quotes Ye Qi, a member of Volkswagen’s sustainability advisory board, as saying that European and American automakers will have problems if they don’t tackle this pricing problem.

“Unless they create more affordable electric vehicles, they run the risk of losing their domestic market advantage to their Chinese competitors,” Qi said.

There are competitors waiting on the horizon to launch an assault on the European mass market. The FreZe Nikrob EV, the European version of the popular Chinese Hongguang MINI EV, manufactured by a joint venture between General Motors

DG
from the United States, Chinese SAIC

SAIC
and Wuling, has already started selling in small numbers in Spain, Italy and France.

Koketso Tsoai, automotive analyst at Fitch Solutions, said the market for affordable small electric cars depends on the development of cheaper battery technology to drive down prices. Due to the success in China of small electric cars like the Hong Guang MINI, this is where the experience is building, and Europe will likely be the first target.

Chinese car buyers last year bought nearly 130,000 MINIs from Hong Guang, according to French consulting firm Inovev.

Felipe Munoz, global automotive analyst at JATO Dynamics, said Europeans need to act quickly to bring affordable electric cars to market, but doing so cost-effectively is almost impossible.

“If the Europeans do nothing about it, the segment will be controlled by the Chinese,” Munoz said.

While it’s no secret that Europeans face an attack on entry-level electric cars, its manufacturers are crippled by European Union (EU) regulations. These rules were designed to make it possible to make heavier, more expensive electric cars with a healthy profit, but the return on investment has resulted in tighter regulations on small cars. This makes profits on inexpensive small vehicles difficult to achieve. Unless the rules are changed soon, the average wages of Europeans will likely be excluded from the new car market.

Earlier this year Carlos Tavares, CEO of Stellantis, now the second-best-selling brand group in Europe after Volkswagen, said the EU policy designed to take entry-level ICE cars off the market could not not be maintained.

“I cannot imagine a democratic society where there is no freedom of mobility because it is only for rich people and everyone else will use public transport,” Tavares said in a speech.

Tavares criticized the EU for making electric technology mandatory, rather than allowing multiple technologies to coexist. Don’t expect the EU to dilute its attempt to eliminate cheap ICE vehicles, but it is much more likely to make concessions to make electric cars affordable for the masses and profitable for the masses. builders.

If this is not the case, European industry will see its basic markets monopolized by China.

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About Christopher Easley

Christopher Easley

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