Sales of battery electric vehicles are growing in Europe, primarily due to the excitement of wealthy early adopters and government incentives. Still, for the electric car revolution to succeed, automakers must generate genuine demand from the mainstream market based on price and usability. Unfortunately, at the moment, that appears to be an unachievable dream.
Failure to create electric vehicles affordable to the ordinary wage-earner will also condemn the automobile industry to a drastically diminished future of volume reductions, factory closures, and mass layoffs. Moreover, the political repercussions will be severe when middle-income voters discover they cannot afford the freedom typically associated with automobile ownership. If this narrative line persists, the yellow vests movement in France, which erupted in violent and prolonged protests in response to a sudden massive increase in fuel price, will be at the forefront of politicians' minds.
The electric vehicle sector is gaining traction. According to Schmidt Automotive, battery electric vehicle sales in Western Europe will reach 60%, or 8.4 million vehicles, by 2030. Also, BEV sales more than quadrupled to just under 750,000 units in 2020 and increased again this year to 1,143,000 units, or 10.3 percent of the market.
This significant increase in predicted sales implies that a sizable chunk will have to be seriously inexpensive, mass market-friendly, and non-gasoline or diesel driven. This reality raises enormous questions. The Citroen Ami is a little electric city car that demonstrates the way but is not ready for prime time due to short-range, speed, or quality. Where are these sub €10,000 after-tax ($11,335) automobiles going to be manufactured, and if they are, where will the requisite battery raw materials come from? What happens to the prices of some of its critical constituents if demand increases unexpectedly? Prices will rise, shattering the assumption that BEVs will inevitably grow more affordable.
If these automobiles are not manufactured in Europe, they will undoubtedly originate in China. If they do not develop in China, only the exceedingly rich will purchase electric cars, eliminating the European sector. Government support is unavoidable, but it is now focused on the comparatively rich, who also benefit from the subsidized charging network. Many typical salary people will be unable to install their home chargers because of the restrictions imposed by flats and terraced homes.
The European Union's decision to require electric vehicles over internal combustion engine vehicles is also anticipated to limit the used market, further impairing the access to personal mobility. Given the present political environment in Europe (Britain has already declared that no new ICE vehicles would be produced after 2030), increased fuel costs or measures such as actual prohibitions on ICE vehicle entry into cities will ensure that this alternative is stymied unless political reality intervenes. One of the primary selling factors for BEVs is the low cost of the fuel in comparison to fossil fuels when plugged into household power. However, as Europe attempts to switch to carbon-neutral energy, the cost of electricity increases, and this advantage may soon vanish.
This BEV for ICE scenario is directly related to EU requirements requiring car and SUV manufacturers to increase average fuel economy to roughly 57 miles per gallon in 2020/2021, up from 41.9 mpg in 2015, before tightening again by 15% in 2025 and reaching 92 mpg by 2030. By 2025, the standards may be satisfied with a combination of plug-in hybrids and electric vehicles, but by 2030, they will demand nearly all battery-electric cars. After 2025, the EU is anticipated to tighten the restrictions again.
The European Union's design of these regulations is criticized for European manufacturers' focus on high-priced BEVs. It is widely agreed that these laws must be changed to enable the production of affordable electric city cars (like Fiat electric cars), and action is awaited.
Inovev, a French auto consultancy, examined the consequences of this abrupt shift from ICE to BEV in a report, speculating on the impact of a 35% BEV share in Europe and speculating on the market's size at that point. Inovev speculates that manufacturers may aim to phase out small automobiles in favor of larger ones, which has some unsettling consequences.
"There is a danger that car costs will continue to rise until they reach an unacceptably high level (for customers), resulting in a rapid decline in the market for new automobiles. As a result, some users may choose to abandon their vehicle, while others may opt to retain it longer," Inovev remarked. "A gap will develop in the ranges of European automobile manufacturers, with no manufacturer offering tiny automobiles. This tendency may prove to be an incentive for non-European automakers to expand in Europe, particularly Chinese automakers," according to Inovev.
The EU's decision to enforce a BEV victory over other technologies, rather than allowing market forces to determine which technology would prevail in the long run, prompted a rare public intervention from Stellantis CEO Carlos Tavares.
"What has been determined is to impose an electrification mandate on the automobile sector that would add 50% to the cost of a conventional car. There is no way we can pass 50% of the higher costs on to the ultimate customer since the majority of the middle class would be unable to pay," Tavares told Reuters in early December.
Stellantis was founded earlier this year through the merging of Groupe PSA and Fiat Chrysler Automobiles and included the Peugeot, Citroen, Opel, Vauxhall, Fiat, Chrysler, and Alfa Romeo brands.
"Over the next five years, we must absorb 10% productivity growth each year in an industry accustomed to producing 2% to 3% productivity gains. The future will reveal who will be able to digest this and who will be unable to. "We are pushing the industry on its toes," Tavares explained. "I cannot conceive of a democratic society in which there is no freedom of mobility because it is reserved for the affluent and everyone else uses public transportation," Tavares said in a speech.
Tavares claimed that the laws governing CO2 emissions were political in nature and were not developed in consultation with industry. He stated that it would have been preferable to take a more progressive strategy and gradually phase out internal combustion engines automobiles.
"I believe we might have been more efficient with a combination of technologies, not just one," Tavares remarked at a Financial Times conference.
No other car industry figure has made such blunt statements publicly, but it appears probable that comparable comments were made behind closed doors with legislators. To ensure the survival and growth of European mass-market manufacturers, the EU must intervene to boost small electric vehicle production. If it does not, cynics will assert that there is a hidden political objective to eliminate the automobile in favor of mass transit. Without a doubt, the yellow vests movement is keeping a close eye on developments.
