Electric Cars Gaining Traction in Europe
Europeans are actively switching to electric cars and hybrids. Interestingly, the demand for electric vehicles is growing at a faster rate than traditional petrol or diesel-powered vehicles. Against this backdrop, a battle ensues among European, Korean, Chinese, and American companies for the wallets of buyers. However, this competition is welcomed as buyers will soon witness a variety of new models and lower prices.
According to the European Automobile Manufacturers' Association (ACEA), electric car sales in the European Union soared by 36% year-on-year in October(There are not November results yet). In comparison, the market for petrol cars grew by 8%, while diesel vehicles saw a decline of 13%.
While comparing these two markets directly is not entirely fair, as electric vehicles are still less common on the roads, the European Union, in light of its "green transition," encourages consumers to opt for environmentally friendly transportation.
Buyers can receive compensation of up to 25% of an electric car's price, somewhat akin to cashback. Some countries provide subsidies for the installation of charging stations, exempt electric car owners from road taxes, and allocate free parking spaces for them.
Simultaneously, European car manufacturers are facing challenging times. They are racing against the clock due to the impending ban on the sale of new internal combustion engine cars, set to take effect in 2035. Consequently, automotive companies must ramp up the production of electric cars. However, European companies are encountering stiff competition from Chinese auto giants keen on conquering the European market.
Chinese companies are pressing with competitive prices and keeping European manufacturers on edge by controlling the supply of critical components, including batteries and electric engines.
Nevertheless, consumers stand to benefit from this competition. The range of electric car models will become more diverse, and prices are expected to decrease in the future.
PHOTO: The top three positions for the number of purchased electric cars are occupied by Tesla Model Y, Tesla Model 3, and VW ID.4. The explanatory lineup indicates the ranking by sales, model of the electric car, the number of units sold, and the share in electric car sales from January to October 2023. SOURCE: The Gaze, Getty Images
Rapid Growth
The surge in the electric car market in the EU occurred in 2020. Electric car sales grew by 2.2 times year-on-year, and plug-in hybrid sales almost quadrupled. In 2022, nearly 2 million electric and hybrid vehicles were sold in the European Union, accounting for over 21% of all vehicles.
In 2023, the growth of electric cars continues. According to ACEA, about 2.5 million electric cars were registered in Europe in the first 10 months, really surpassing the total for the entire year of 2022. Some EU countries are experiencing exponential growth. In Slovenia, Hungary, Denmark, and Estonia, the number of electric cars doubled in October, while in the Czech Republic and Cyprus, it increased by 2.5 times.
There is an explanation for this phenomenon. In some European countries, the market is naturally small and only just beginning to grow. In Slovenia, a few hundred cars are sold each month, in Cyprus – about a hundred, compared to tens of thousands in Germany. Therefore, any surge in sales immediately distorts the statistics for smaller countries.
Additionally, buyers are enticed by the incentives promised by authorities. In some Belgian provinces (Flanders), owners of electric cars are exempt from road tax. In Cyprus, purchasers of electric cars can receive compensation from the state of up to €19,000. In the Czech Republic, there is no registration fee when putting a "green" car on the record. In Denmark, buying an electric car qualifies for a tax deduction of DKK 165,000 (€22,000). These advantages make owning an electric car more affordable, stimulating sales.
PHOTO: Models Volvo XC40, Skoda Enyaq, MG 4 secured the fourth to sixth positions for the number of purchased electric cars. The explanatory lineup indicates the ranking by sales, model of the electric car, the number of units sold, and the share in electric car sales from January to October 2023. SOURCE: The Gaze, Getty Images
Direct Competition from China
One might think that Europeans should prefer cars manufactured in the EU. This is not just an act of patriotism and support for local manufacturers but also a calculation by buyers that they will receive adequate service in the future. After all, overseas companies are not always able to provide satisfactory after-sales service.
However, the fact is that the best-selling electric cars in Europe from January to October 2023 are the Tesla Model Y and Tesla Model 3. The VW ID.4 took third place, followed by the Volvo XC40 and the Skoda Enyaq. Impressively, Tesla occupied nearly one-eighth of the market share for electric car sales in the past 10 months, even though electric cars accounted for just over a quarter of total car sales. Is this a significant figure? Of course, sure!
Overall, European companies face pressure from Chinese manufacturers and American and Korean automotive conglomerates. For instance, the MG 4 (manufactured by Nanjing Automobile, China) ranked sixth among the best-selling electric cars in the EU. The American Ford Kuga PHEV took the 11th spot, and the Niro EV crossover from the Korean brand KIA claimed the 13th position.
And to be completely candid, even the Volvo XC40 cannot be considered entirely European. This is because the Volvo Cars division, responsible for producing passenger cars, has been owned by the Chinese automotive conglomerate Geely since 2010.
PHOTO: Models Audi Q4 e-tron, VW ID.3, Fiat 500e, Dacia Spring occupied the seventh to tenth positions for the number of purchased electric cars. The explanatory lineup indicates the ranking by sales, model of the electric car, the number of units sold, and the share in electric car sales from January to October 2023. SOURCE: The Gaze, Getty Images
Price, Comfort, and Marketing
European brands continue to dominate in the EU, but foreign manufacturers are gradually carving out a share of the market, now exceeding 40%. The question arises: what attracts buyers to them?
China takes the pricing advantage. Experts estimate a cost difference of 30% or more between European and Chinese electric cars of the same class. Compact models like the BYD Seagull or MG 4 fit into the €10-17 thousand price range. In contrast, counterparts like the Renault Zoe or VW ID.3 will cost buyers €25-35 thousand. Even with possible discounts and subsidies, this is still more expensive than Chinese electric cars.
Korean manufacturers, such as KIA and Hyundai, aim to compete in a similar price segment to European brands. For example, the KIA Niro EV costs around €40 thousand, comparable to the VW ID.4. However, Korean companies emphasize the richer interior features of their cars, including options for comfort, safety, and various "smart" functions.
Tesla initially set a high standard, positioning itself as a premium-level manufacturer. While current models may lack those ambitions, the company enhances them with useful and less essential features (air suspension, autopilot, futuristic interior design) to justify the high price. In Europe, Tesla competes with models like the Audi Q4 E-tron and BMW i4.
For now, Elon Musk's company leads in these races. Europeans enjoy the sensation of being in a Tesla cabin, akin to a space shuttle. Yes, it's marketing, but it works.
A Change in Dynamics Next Year
The real battle for European consumers will commence in 2025, linked to the enforcement of "green" quotas in the EU and the UK to boost electric car sales. By then, many manufacturers will introduce innovations, including in the relatively lower price segment.
Chinese companies will continue developing a range of budget electric cars priced from €8-10 thousand. American manufacturers (Jeep, Chrysler have already announced plans), and Japanese companies, with Toyota promising six electric models in Europe by 2026, will also join the fray.
European conglomerates will not be left behind. In 2025, Renault will launch the successor to the Zoe model – the Renault 5 hatchback, and Volkswagen has announced an "affordable electric car" priced at €20 thousand, set to debut in 2026.
According to UBS, an investment bank, electric car and hybrid sales in Europe will grow to 2.5 million in 2024 and 3.6 million in 2025. However, these optimistic forecasts come with risks.
Persistent plans by the EU to cease the supply of rare-earth metals and other components from China pose a challenge. Such radicalism could lead to a crisis in domestic electric car production.
There is also uncertainty about the sustained growth in demand for "green" vehicles. Against the backdrop of traditional combustion engine cars, electric cars remain a luxurious choice. Government subsidies alone cannot resolve this issue. A compensation of 10-15% is, of course, pleasant. However, as long as the price difference between electric cars and petrol vehicles is measured in multiples (and in the case of used cars, even up to 10 times), persuading buyers to fully transition to clean energy will be an exceptionally challenging task. Perhaps, only through a radical increase in fuel costs due to even higher taxes could this shift be encouraged. But it isn't a good idea