Catherine Michaud and her husband, Jean-Yves, seem to fit perfectly into the target consumer group for electric cars.
She is a retired lawyer, and no longer needs to commute. The couple owns a house where they can charge an electric car at their convenience and at a lower cost. They tried Electric car rental in their small French village near Nice last year and enjoyed the experience.
However, the couple says they are bothered by the cost of purchasing an electric car. “People will never be able to afford electric cars. It’s impossible,” says Michaud.
Her husband adds that the challenge lies in getting rid of old habits. “We have always lived with motor cars. Those are our reactions. We know that there are gas stations along the highway. Here, you have to think about your trip and plan it a little, and download the mobile application.
Fifteen years after Nissan launched the world’s first mass-produced electric car in 2010, consumers in most parts of the world are still very reluctant to switch from combustion-engined cars to fully electric vehicles.
What automakers initially embraced as a necessary development has increasingly become an existential crisis for an industry that has spent tens of billions of dollars developing electric cars and the batteries that power them in the hope that consumers will buy into the technology.
This week, Northvolt, Europe’s leading battery company, 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 unprecedented plant closures. Ford also recently revealed plans to cut about 4,000 jobs in Europe to address slower-than-expected demand for electric vehicles.
European automakers and suppliers are likely to continue to focus on becoming leaner next year rather than building capabilities to expand sales, says Mathias Medrich, former CEO of battery materials maker Umicore, which will join German auto supplier ZF Friedrichshafen in January. Electric cars. “The year the electric car will be reborn is probably 2026, not 2025,” Medrich says.
America is also likely to be further behind in its green transition, given President-elect Donald Trump’s promises to eliminate generous subsidies for electric cars. Despite President Joe Biden’s ambitious goal of having electric vehicles make up half of all new cars sold in the United States by 2030, they accounted for just 10 percent of the market last year.
The industry’s capacity to build electric vehicles is expected to decline further next year, as automakers have revised their electric vehicle production plans by 50 percent in the United States and 29 percent in Europe, according to Bernstein estimates. Electric vehicle penetration is expected to reach 23 percent in Europe and 13 percent in the United States in 2025.
“The forecast for electric vehicle production for 2025 appears to have gone in only one direction, which is down,” Daniel Roeska, an analyst at Bernstein, wrote in a report.
Reasons for slow growth in electric vehicle sales range from high upfront costs to concerns about driving range and charging infrastructure. The promise of lower energy prices has faded with the war in Ukraine, while high interest rates globally have pushed up monthly rental payments.
According to an analysis by the NGO group Transport and Environment, the average price of an electric car in Europe was around €40,000 before taxes in 2020. Today, the price is around €45,000.
A separate study by the European Commission suggests that the average price European consumers are willing to pay for an electric car is €20,000, including new and used sales.
But auto industry executives also blame government policies in different countries, which have not been consistent despite a common long-term goal of decarbonization.
Matthias Schmidt, an independent auto analyst, estimates that electric car volumes will fall by 29 percent this year in Germany, Europe’s largest market, after Berlin suddenly withdrew subsidies for purchasing electric cars in late 2023. France plans to cut subsidies for purchasing electric cars by the same amount. . Half for some families next year.
McLaren CEO Michael Leiters says government subsidies for purchasing electric cars in recent years have created artificial demand that has not been sustainable. “We’ve pushed hard on battery electric cars,” Leiters says in an interview. “I think stimulus is not healthy and that is why we have seen an abnormal rate of acceleration, and then we see a decline.”
The industry and analysts are divided on the right mix of incentives and incentives to get sales started again. Auto executives feel governments in Europe are pulling stimulus before consumers are fully ready for EVs — but governments also realize that holding on domestic for too long could be risky and expensive.
In China, a state-level project The idea of electrifying the automobile industry, conceived nearly two decades ago, is coming to fruition.
More than half of new cars sold in China today are electric or hybrid cars, while electric cars in Chinese showrooms are nearing price parity with gasoline-powered cars.
For Beijing, the auto sector electrification policy is designed to help China rid cities of choking pollution and address crippling dependence on foreign oil. But it is now seen as a way to support decarbonisation and also give Chinese companies a path to global dominance.
By the late 2000s, government officials concluded that domestic automakers would not be able to compete with Western competitors in gasoline-powered vehicles.
But they saw an opportunity to take on the likes of General Motors and Volkswagen in electric vehicles, as the country built a supply chain to produce lithium-ion batteries for mobile phones in large quantities and at low cost. As a rare earth producer, it was also strong in electric motors.
Beijing began pilot programs in ten cities across the country to promote the use of electric vehicles in 2009 with an ambitious aim to invest RMB100 billion ($13.8 billion) in “new energy vehicles” over the next decade.
Two years later, the World Bank exited A set of recommendations Urging China’s policy to go beyond subsidies for electric vehicle purchases to include more comprehensive measures to develop charging infrastructure and investments in developing technology and manufacturing capacity.
“In the long term, consumers will only commit to electric vehicles if they find value in them,” the World Bank said, calling for the creation of a vehicle financing market and leasing system as well as a secondary market for batteries to reduce demand for cars. The initial cost of purchasing a car.
When the State Council, China’s cabinet, came out with a plan for the auto industry in the summer of 2012, Beijing combined most of the World Bank’s recommendations with a strategy to develop the entire auto supply chain from components and batteries to materials and charging. Utilities, with smart grids as well as renewable energy, according to him analysis By the law firm Akin Gump.
“China’s entire electric vehicle supply chain has been integrated into an industrial strategy, which is linked end-to-end. Europe has nothing like it,” says Andrew Bergbaum, managing director at Alex Partners.
But Europe’s free market is neither able nor willing to compete with Chinese-style state capitalism. European Union member states have agreed to impose tariffs of up to 45 percent on Chinese electric vehicle imports, arguing that heavy subsidies for local automakers make it difficult for European rivals to compete fairly.
Sean Xu, CEO of the Omoda and Jaecoo brands at Chinese automaker Chery, says the success of the country’s automakers is not the result of government policy alone.
“All Chinese brands, especially the big brands, are investing a lot to develop new technology,” says Xu, noting that consumers are now buying electric and hybrid cars as much as in-car technology as any other aspect of the car. “This type of technological innovation can benefit consumers and this can also happen in the UK and European markets.”
We can see the potential and pitfalls of generous incentives in Norway, the only country in Europe to successfully achieve electric transition.
In October, 94 percent of cars sold in the Scandinavian country were electric, putting it on track to meet the goal of no new fossil fuel-powered passenger cars next year.
But the country, whose wealth depends on fossil fuels, has achieved this prosperity through tax breaks and spending far beyond anything on offer elsewhere in Europe.
94%A percentage of cars sold in Norway are electric
In addition to lower parking fees and road tolls, Norwegian drivers have received generous tax incentives for choosing electric cars over gasoline-powered cars. Charging infrastructure is ubiquitous, thanks in part to government support.
But even in a country with a huge sovereign wealth fund, this level of support has proven unsustainable.
With the cost of electricity subsidies reaching $4 billion in 2022, Norway has begun to roll back the benefits it was offering last year, but the government continues to struggle to wean consumers off the big incentives.
Even as some In Europe, carrots are being removed, while others are reviewing the use of sticks.
In the United Kingdom, the government is considering relaxing requirements imposed on car manufacturers to meet electric car sales targets. European automakers are pressing the EU to extend compliance periods to meet CO2 reduction targets.
But some in the auto industry remain optimistic that the electric vehicle revolution is still within reach, even without radical changes in government support.
Executives hope industry expectations will change as 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 emissions rules in the European Union. Some of the new models will be more affordable with prices under €25,000.
Surveys have shown that consumers are unlikely to return to gasoline-powered cars once they make the electric switch. EVs are also quieter, accelerate like sports cars, and can save money in the long run.
In the short term, the focus will be on developing affordable cars, even if that means relying on Chinese battery manufacturers to reduce the cost of batteries. “Now, consumers want a good car and don’t care if it’s electric or not,” Medrich says. “So what all the automakers are looking at now is cost.”
Additional reporting by Edward White in Shanghai
