Will Tiny Cars Rescue Europe’s Ambitious Electric Vehicle Plan?
“Europe is the land of small cars, and they are one of the European car industry’s strengths”
The European Union’s plans to make the new car market an electric vehicle monopoly by 2035 look like failing but a change of direction is imminent, tiny is the watchword and a new, cheaper mass market in EVs is the target.
The European Union has mandated that about 80% of new car sales in 2030 should be electric and 100% (since provisionally cut to 90%) in 2035. The Commission, the EU’s executive arm, has decided that the pace of EV sales is far too slow and has proposed a new category of small and affordable cars.
No details are available yet, but Japan’s cheap little Kei cars may well provide a blueprint. These cars may be small and inexpensive, but they still offer some of the latest safety technology. Prices are kept low because of small, 660 cc engines, and significant tax and financial advantages.
If current trends continue in Europe, the required emergence of a mass market in EVs looks unlikely. For instance, investment researcher Jefferies predicts EV sales in Europe of 5.6 million in 2030 or only a 42% market share and 8.7 million in 2035 or 65%.
European Parliament will consider Automotive Package
The proposal for small and affordable cars will be examined by the European Parliament over coming months. This is part of the “Automotive Package” aimed at easing the way for European manufacturers to meet the 2035 zero carbon dioxide emissions requirements.
Felipe Munoz, an industry expert who runs the industry research platform Car Industry Analysis, likes the small car idea.
“This is for sure one of the biggest bets from Europe, and certainly a wise move. Along with Japan and India, Europe is the land of small cars, and they are one of the European car industry’s strengths,” Munoz said.
“For this plan to succeed, it needs to be joint work between the regulators and the carmakers. It means that these cars must be profitable thanks to the joint effort. A public incentive must be in the equation but also the cost efficiency produced by the efforts made by the carmakers,” according to Munoz.
Electric car technology favors light-weight little vehicles which can scamper around city and urban locations with perhaps two adults and two children on board. Combined with the fact the average daily car journey to the shops, schools and local commutes isn’t more than 30 miles, a vehicle with say 100 miles of range, a small battery, and 60 miles per hour top speed could be priced from say $10,000 (€8,500). That sounds like an irresistible proposition. Currently, the cheapest EVs in Europe sell for more than twice that.
Suzuki, the biggest Kei car maker
In Japan, this is a massive sector, led by Suzuki. According to investment researcher Bernstein, Suzuki is the biggest Kei car maker, selling 2.8 million last year around the world. That was 89% of its annual total. Until recently, Kei cars have been mainly internal combustion engine powered, but Suzuki recently unveiled its Vision e-Sky concept electric Kei car.
“Suzuki may stand to gain from the global Kei car boom. While details remain unclear, we believe Suzuki is well positioned to benefit from the trend towards smaller, affordable vehicles,” Berstein said in a report.
Suzuki was asked to comment but declined.
Bernstein noted in the report that President Donald Trump recently expressed his liking for “tiny cars”, although someone travelling around in that massive, armored vehicle known as “The Beast” might think a Cadillac Escalade was on the small side. Trump wanted these small cars to be built in America, powered by gasoline, electric or hybrid and urged carmakers to “start building them now,” according to Bernstein.
EU discourages small cars
The latest EVs on sale in Europe are mainly medium to large SUVs, although the cheaper sector is starting to expand. EU regulations were designed to allow manufacturers to make decent profits in the higher end of the market and actively discouraged the production of entry-level gasoline and electric models.
Car Industry Analysis’s Munoz said this has to change.
“The EU needs to address the regulation issue. With the current emission, safety, and labor regulations, it is impossible to produce profitable Kei-cars. These regulations must be adapted to the plan, just as it works in Japan. For instance, the safety standards of a Japanese Kei car are not the same of a regular car, because the former is due to be driven mainly in the cities at lower speeds,” Munoz said in an email exchange.
Chinese may catch up quickly
“If these conditions are made, the project can succeed and give oxygen back to the European carmakers, and those non-Europeans with small cars expertise operating in Europe. Suzuki for example. The Chinese are a bit behind as they have focused their efforts on larger segments. However, they can catch up quickly and eventually make use of the plan too. They just presented a Kei car for the Japanese market.”.
“And regarding Trump, he might like the small cars, but the drivers in America don’t,” Munoz said.
No comments yet.