Europe’s EV Industry Struggles Against Chinese Competition

European automakers and green advocates agree: affordable electric vehicles (EVs) are key to transitioning from early adopters to the mass market. However, with current prices around €25,000 after tax ($27,000), industry leaders’ definition of “affordable” falls short. Chinese automakers, on the other hand, are setting a new standard, with models like the BYD Seagull starting at just €10,200 ($11,000).

Inovev, a French auto consultancy, reported that the Seagull was the eighth best-selling EV in China last year, with nearly 300,000 units sold, while the Wuling Bingo sold over 250,000 units. While BYD has not confirmed plans to import the Seagull to Europe, industry observers anticipate this move given the widening gap in the market. A partnership with a struggling European incumbent could ease the entry for Chinese manufacturers into the EU market.

Despite skepticism about European acceptance of these Chinese EVs, the European Union’s mandate for electric vehicle adoption leaves little choice. The EU aims for EVs to make up 80% of new car sales by 2030 and 100% by 2035. This regulation has put pressure on European manufacturers to compete with the affordability of Chinese EVs.

To address this challenge, Volkswagen, Renault, and Stellantis are reportedly exploring alliances with competitors to counter the Chinese threat. Renault, in particular, is vulnerable to competition due to its size compared to multi-brand giants like VW and Stellantis. Renault’s CEO has proposed a pan-European alliance to share the cost burden of building affordable EVs, similar to Airbus in the aviation industry.

Market forecasts predict a significant increase in EV sales in Europe, from 2 million in 2024 to nearly 9-9.6 million by 2030. However, this growth relies on the availability of mass-market, affordable EVs. Current offerings from European manufacturers, priced around €20,000-$25,000, are still out of reach for many consumers.

Critics argue that European carmakers are focusing too much on high-priced, high-profit EVs, which hinders the mass-market adoption of EVs. They point out upcoming launches of “affordable” EVs like the Fiat e-Panda, Skoda Elroq, Citroen e-C3, and Hyundai Casper, priced from €20,000 to €25,000, which are still too expensive for many consumers.

Despite efforts to rationalize production and generate funds for affordable EVs, analysts don’t expect truly affordable mass-market models from European manufacturers until 2030. Lobby groups suggest that EU rules on efficiency, vehicle tax, and subsidies need to change to incentivize the production of smaller, more affordable EVs.

The surge in EV sales has recently slowed, but a potential price war could benefit the market. European manufacturers may introduce more affordable EVs in the €20,000-€25,000 range, compared to the current average of €40,000 ($43,200). However, this might not be enough to compete with Chinese offerings.

The future of Europe’s auto industry hinges on its ability to produce affordable EVs and compete with China. The EU faces a choice between maintaining its CO2 regulations and risking the industry’s bankruptcy, or allowing Chinese EVs to dominate the market. Either way, the landscape of affordable EVs in Europe is set to change dramatically in the coming years.