Booming electric car sales in Europe may face a reality check soon
Sales of battery electric cars in Europe are picking up speed, mainly on the basis of the enthusiasm of well-heeled early adopters and government aid, but for the electric car revolution to be successful, automakers must inspire real demand. of the mass market as a function of price and utility. Currently, it looks like an impossible dream.
Failure to produce electric vehicles for the average wage earner will also doom the auto industry to a greatly reduced future of reduced volumes, closed factories and mass layoffs. The political fallout will also be severe, as middle-income voters find themselves unable to afford the freedom traditionally afforded by car ownership. The “yellow vests” movement in France, when a sudden and massive increase in the price of diesel sparked violent and protracted protests, will be at the forefront of politicians’ thinking if this story persists.
The electric car market is growing. According to Schmidt Automotive, sales of battery electric vehicles (BEVs) will reach a 60% market share in Western Europe by 2030, or 8.4 million vehicles. BEV sales more than doubled in 2020 to just under 750,000 and jumped again this year with sales of 1,143,000, or 10.3% of the market.
This massive increase in projected sales logically assumes that a huge proportion will have to be seriously affordable, suitable for the mass market, and not fueled by gasoline or diesel. This raises huge questions. The small electric Citroën Ami city car is leading the way but is not yet ready for prime time, with not enough range, speed or quality. Where will these vehicles of less than € 10,000 after tax ($ 11,335) come from and if they are produced, where are the raw materials needed for the batteries? What happens to the price of some of their crucial ingredients if demand suddenly increases? Prices will accelerate, dashing hopes that BEVs will inexorably become cheaper and cheaper.
If these vehicles are not built in Europe, they are likely to come from China. If they don’t come from China, that means only the relatively wealthy will be able to afford electric vehicles, and in this scenario, European industry faces decimation. Either way, government subsidies are inevitable, but they are currently targeting the relatively wealthy, who also benefit from the subsidized charging network. Many average workers will not be able to install their own domestic chargers because apartments and townhouses make it impossible.
European Union (EU) action to make electric vehicles mandatory rather than internal combustion engine (ICE) vehicles is also likely to reduce the supply in the second-hand market, further damaging the access of the less well-off to private transport. Given the current political climate in Europe (Britain has already decreed that there are no more new ICE vehicles after 2030), higher taxes on fuel or measures such as a physical ban on Entering cities in ICE vehicles will ensure that a stake is placed at the heart of this option, unless political reality kicks in. One of the main selling points of BEVs is the low cost of fuel compared to the fossil variety when you plug into your home’s electricity. But as Europeans try to switch to carbon neutral energy, the price of electricity is rising, so that advantage may soon wane.
This BEV scenario for ICE is directly attributable to EU regulations which insist that sedan and SUV manufacturers increase average fuel efficiency by reducing CO2 emissions to the equivalent of around 57 miles per gallon. US in 2020/2021, up from 41.9 mpg in 2015, shrinking again by 15% in 2025 and reaching 92 mpg by 2030. Rules from 2025 can likely be met by a combination of plug-in hybrids and electric cars, but will require almost 100% batteries only by 2030. The EU is expected to tighten the rules again after 2025.
The EU’s design of these rules is blamed for the fact that European manufacturers focus on high-priced BEVs. It is a recognized fact that these rules must change in order for the industry to produce inexpensive electric city cars, and action is expected.
French automotive consultancy Inovev, in a report, examined the consequences of this sudden switch from ICE to BEV and speculates on the impact of a 35% share of BEV in Europe (compared to the forecast of 60% Schmidt Automotive for Western Europe, which includes the 5 major markets of Germany, France, Great Britain, Italy and Spain) and wonders what the size of the market will then be.
“Will it be the equivalent of 2019 before the Covid crisis, or compared to 2020/2021? Or even much lower, ”said Inovev.
Inovev speculates that automakers will seek to do away with small vehicles almost while pushing larger ones, and suggests some uncomfortable implications.
“There is a risk of a continuous increase in vehicle prices to reach a level that will no longer be accepted (by consumers), with the consequence of a sharp drop in the market for new vehicles. Some users may turn away from the car, others may prefer to keep their vehicle longer, ”said Inovev.
“A hole will form in the range of European manufacturers, no one producing small vehicles. This may prove to be an incentive for the development of non-European car manufacturers in Europe, in particular Chinese car manufacturers, ”according to Inovev.
This EU decision to impose a BEV victory rather than let market forces decide which technology will win in the long run, has led to rare public interventions by Stellantis CEO Carlos Tavares.
“What has been decided is to impose on the automotive industry an electrification which brings 50% additional costs compared to a conventional vehicle. There is no way to pass 50% of the extra costs to the end consumer because most of the middle class will not be able to pay, ”Tavares told Reuters in early December.
Stellantis was formed by the merger of Groupe PSA and Fiat Chrysler Automobiles earlier in 2021 and includes brands such as Peugeot, Citroën, Opel, Vauxhall, Fiat, Chrysler and Alfa Romeo.
“Over the next 5 years, we will have to digest productivity of 10% per year in an industry used to improving productivity by 2-3%. The future will tell who will be able to digest this and who will fail. We are putting the industry within its limits, ”Tavares said.
Earlier this year, Tavares said so.
“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 complained that the CO2 emissions regulations were political and were not designed by industry. He said it would have been better to tackle the problem with a less drastic approach and gradually replace ICE vehicles with electric ones.
“I think we could have been more efficient with more than one technology, not just one,” Tavares told a Financial Times conference.
No other automaker has reported such forceful comments, although it seems likely that behind closed doors with politicians, similar comments were rife. If European mass-market manufacturers are to survive and prosper, the EU must act to boost the production of small electric cars. If not, cynics will argue that there is an underlying political agenda to kill the car in favor of public transport. There is no doubt that the Yellow Vests movement is paying attention.