Catherine Michaud and her husband Jean-Yves seem to fit perfectly into the target consumer group for electric cars.
As a retired lawyer, she no longer has to commute. The couple owns a home where they can charge their electric car at a low cost whenever they want. They tried renting an electric car in a small French village near Nice last year and enjoyed the experience.
Still, the couple says they are reluctant to buy an EV because of the cost. “People will never be able to afford electric cars. It’s impossible,” Michaud says.
The challenge, the husband added, is to break old habits. “We have always lived with engine cars. That’s the reflex we have. We know there are gas stations along the highway. Here we take a moment to think about our own journey. You need to make a plan and download the mobile app.”
Fifteen years after Nissan launched the world’s first mass-produced electric vehicle in 2010, consumers in many parts of the world remain stubbornly reluctant to switch from internal combustion engine vehicles to fully electric vehicles. It is.
What automakers initially embraced as a necessary evolution is a huge turnoff for an industry that has spent tens of billions of dollars developing electric vehicles and the batteries that power them in hopes that consumers will buy into the technology. It is becoming an existential crisis.
This week, Northvolt, Europe’s leading battery champion, filed for bankruptcy, throwing the continent’s entire industrial strategy into question. Vauxhall owner Stellantis on Tuesday announced plans to close its van factory in Luton, putting around 1,100 UK jobs at risk, just weeks after Volkswagen warned of an unprecedented factory closure. exposed to Ford also recently announced plans to cut about 4,000 jobs in Europe as it responds to slower-than-expected demand for electric vehicles.
Matthias Miedreich, former chief executive of battery materials maker Umicore, which will join German auto supplier ZF Friedrichshafen in January, said European automakers and suppliers will continue to focus on building capacity to boost EV sales next year rather than building capacity to expand EV sales. He says it is likely that the company will continue to focus on streamlining. “The year that electric cars come back will probably be 2026, not 2025,” says Miedreich.
And given President-elect Donald Trump’s pledge to end generous subsidies for electric vehicles, the U.S. is likely to fall further behind in the green transition. Despite President Joe Biden’s ambitious goal of making half of all new cars sold in the U.S. EVs by 2030, they had just 10% market share last year.
Bernstein estimates that automakers have revised their EV production plans by 50% in the U.S. and 29% in Europe, and the industry’s EV production capacity is expected to decline further next year. The penetration rate of EVs is expected to reach 23% in Europe and 13% in the US by 2025.
“2025 EV production projections appear to be moving in only one direction: down,” Bernstein analyst Daniel Loeska said in a report.
Reasons for slowing growth in EV sales range from high initial costs to concerns about range and charging infrastructure. Hopes for lower energy prices have faded due to the war in Ukraine, and monthly lease payments are soaring due to high interest rates worldwide.
According to an analysis by the NGO Transport and Environment, the average price of an EV in Europe was around 40,000 euros before tax in 2020, but now it is around 45,000 euros.
Another study by the European Commission found that the median price European consumers are prepared to pay for an EV is 20,000 euros, including new and second-hand sales.
But auto industry executives also blame inconsistent government policies, despite a common long-term goal of decarbonization.
Independent auto analyst Matthias Schmidt predicts a 29% drop in EV sales in Germany, Europe’s biggest market, this year after Berlin abruptly ended EV purchase subsidies at the end of 2023. France plans to cut EV purchase subsidies by the same amount. Next year, it will be cut in half for some families.
McLaren CEO Michael Reiters says government subsidies for EV purchases in recent years have created unsustainable artificial demand. “We focused too much on battery electric vehicles,” Reiters said in an interview. “I don’t think the incentives are healthy. That’s why we’re seeing an unnatural acceleration and then a dip.”
The industry and analysts are divided on the appropriate mix of incentives and inducements to restart sales. Auto industry executives feel that European governments are pulling back on incentives before consumers are fully accustomed to EVs, but governments are worried about the risks and costs of keeping sweeteners in storage for long periods of time. We are also aware that this may occur.
National project in China The electrification of the automobile industry, conceived about 20 years ago, is beginning to bear fruit.
More than half of the new cars sold in China today are EVs or plug-in hybrids, and the prices of electric cars in Chinese showrooms are approaching parity with gasoline cars.
For the Chinese government, the auto sector electrification policy was designed to help China rid its cities of choking pollution and combat its crippling dependence on foreign oil. But it is now seen as a way to support decarbonization and give Chinese companies a path to global domination.
By the late 2000s, government officials had concluded that local automakers could not compete with their Western rivals in the gasoline-powered vehicle sector.
But because the country had built a supply chain that mass-produced lithium-ion batteries for cell phones at low cost, they saw a chance to beat the likes of General Motors and Volkswagen in the EV field. As a rare earth producer, Japan also had strengths in electric motors.
The Chinese government has set an ambitious goal of investing RMB 100 billion ($13.8 billion) in “new energy vehicles” over the next 10 years, and in 2009 launched a nationwide pilot program to promote the use of electric vehicles. Launched in 10 cities.
Two years later, the World Bank announced the following policy: set of recommendations They urged China’s policies to go beyond EV purchase subsidies and include more comprehensive measures to develop charging infrastructure and invest in technology development and manufacturing capacity.
The World Bank stated, “In the long term, consumers will commit to EVs only if they see value in them,” and called for the creation of an automobile financing market, leasing system, and secondary market for batteries. Initial cost for purchasing a car.
When China’s cabinet, the State Council, released its plan for the auto industry in the summer of 2012, the Chinese government incorporated most of the World Bank’s recommendations into a strategy to develop the entire auto supply chain, from components and batteries to materials and charging. there was. According to Facilities with Smart Grids and Renewable Energy analysis By the law firm Akin Gump.
“China’s entire EV supply chain is embedded in its industrial strategy and connected from end to end. There is nothing like that in Europe,” says Andrew Bergbaum, managing director at AlixPartners.
But European free markets cannot and do not want to compete with Chinese-style state capitalism. EU member states have agreed to impose tariffs of up to 45% on imports of Chinese-made electric cars, saying heavy subsidies to local automakers make it difficult for European rivals to compete fairly.
Sean Xu, chief executive officer of Chinese automaker Chery’s Omoda and Jaku brands, insists that the country’s automakers’ success is not just the result of government policies.
“All brands in China, especially the top brands, are investing heavily in developing new technologies,” Xu said, adding that consumers now value in-vehicle technology as much as other aspects of the car and buy EVs. He points out that he is purchasing a hybrid or hybrid. “This type of innovation could benefit consumers, and this could also happen in the UK and European markets.”
The potential and pitfalls of extravagant incentives can be seen in Norway, the only country in Europe to successfully transition to electricity.
In October, 94% of cars sold in the Nordic country were electric, putting the country on track to achieve its goal of eliminating new fossil fuel passenger cars next year.
But the country, whose wealth is based on fossil fuels, achieved this boom by cutting taxes and spending far more than the rest of Europe.
94%Percentage of electric cars sold in Norway
As well as cheaper parking and road tolls, Norwegian drivers are given generous tax incentives for choosing electric cars over petrol cars. With support from the government, charging infrastructure is also becoming more widespread.
But even in countries with large sovereign wealth funds, this level of support has proven unsustainable.
With the cost of electrification subsidies topping $4 billion in 2022, Norway began rolling back subsidies last year, but the government continues to struggle to wean consumers off of the huge incentives.
even as part of Some European countries have abolished carrots, while others are reconsidering the use of sticks.
The British government is considering easing requirements for car manufacturers to achieve sales targets for electric vehicles. European automakers are lobbying the EU to extend compliance periods to meet CO₂ reduction targets.
But some in the auto industry are optimistic that the EV revolution is still within reach, even without dramatic changes in government support.
Companies from Renault and Stellantis to Volkswagen, Toyota and Hyundai plan to aggressively roll out dozens of electric vehicles next year to meet tougher new EU emissions rules, executives said. I hope that the outlook may change. Some of the new models will be much more affordable, with prices under 25,000 euros.
Research shows that once consumers switch to an electric vehicle, they are unlikely to go back to a gas-powered vehicle. EVs are also quieter, accelerate like sports cars, and save you money in the long run.
In the short term, the focus will be on developing affordable cars, even if it means relying on Chinese battery manufacturers to lower battery costs. “Currently, consumers want to buy a good car and don’t care if it’s electric or not,” Miedreich said. “So what all automakers are looking for now is cost.”
Additional reporting by Edward White in Shanghai
