Europe Must Make Electric Cars For Mass Market.
European carmakers must develop an affordable electric car, but they are heading down a blind alley, obsessed with trying to match high-priced Tesla’s electric car success, instead of producing battery vehicles for the mass market.
They run the risk of losing sales to Chinese vehicles like the Baojun E.
European Union regulations favoring electric vehicles mean that by 2030, internal combustion engine (ICE) cars will be too expensive for buyers on regular incomes. Unless there is a drastic improvement in the affordability of electric vehicles, this will leave a huge number of people unable to afford to buy a car. Instead of matching Tesla at the premium end of the market, and seeking to make an electric car which does everything an ICE vehicle can do, the mass market needs something radically different. A vehicle that is cheap and rugged, with a limited range of abilities – shopping, commuting, and the school run. In a way carmakers need to be less ambitious and give us the better golf-cart. Long journeys would probably require the train for those on average incomes.
Sure, European carmakers are starting to introduce more affordable models, like this VW SEAT Mii electric, but even though they look small they certainly aren’t cheap, yet. This cute little city car costs a cool 22,745 pounds ($28,000), after tax in Britain and before the government subsidy, which currently stands at 3,500 pounds ($4,400). That’s about twice as much as a gasoline-powered version would cost at the entry level of the market.
And this also assumes the current distortions in Germany won’t last long. Large subsidies for electric vehicles of more than 10,000 euros ($11,500), introduced as part of Germany’s short-term coronavirus mitigation plan, has, according to investment researcher Evercore ISI, led to one 50-outlet dealership offering free leases on Renault Zoe electric cars.
“No such things as a free lunch, but a free EV,” said Evercore ISI, pointing this out in a recent report.
Other leasing companies In Germany are joining in. Leasing Time (https://www.leasingtime.de/mini/cooper-leasing/mini-cooper-se-elektro-90272.php) offers a 32,000 euro ($37,000) electric BMW Mini for 157 euros ($180 a month).
But this is a short-term boost. The long-term requires drastic action, and the current offerings aren’t getting close to requirements.
Volkswagen owns Spanish-based SEAT and Czech-based Skoda, which produce electric versions of the little VW Up. The SEAT Mii electric drives sharply and zooms around bends like a go-cart. It is most at home in town though. The performance data – 0-60 mph in just over 12 seconds and top speed of 81 mph – suggest a plodding performance, but nothing could be further from the truth. All the way up to its maximum, the car responds instantly to requests for more because of the electric torque, and it feels well within its powers at normal highway cruising speeds. The car seems made for the outside lane. Unfortunately it is the nature of smaller electric cars that at these kinds of speeds, unless it is a Tesla, battery capacity falls off at an alarming rate. You’d best keep away from fast roads if you want to use the full range of up to 171 miles. This compares poorly with slightly more expensive new electric vehicles like the Renault Zoe (240 miles) and the Peugeot 208 e (220 miles).
“You would have to be really committed to the electric cause to spend that much on such a small vehicle (like SEAT Mii electric). Most people wouldn’t do it. Unless manufacturers can get the price points down on cars like these, they will be quite difficult to sell in the market,” said IHS Markit analyst Tim Urquhart.
Urquhart points out that there are big changes ahead as transport moves from personally owning, and often worshipping, your own wheels, to a world where mobility becomes a commodity.
Here, electric autonomous cars will be summoned by your phone app just when you need it. The fact it’s an anonymous bubble won’t be a problem for a short-term rental.
But that brave new world is maybe 20- years away.
Moran Price, CEO of Israeli start-up IRP Systems irpsystems.com said electric vehicles will become more affordable in a variety of guises, but need to be digitalized and starting with electric scooters and cycles in cities for rent.
IRP Systems makes off-the-shelf electric powertrain products for e-scooters, e-motorcycles, quadricycles and electric cars.
“Governments are pushing the industry towards electrification but eventually this will happen without incentives and in the longer term we see a free market where everyone can make money. The cost of electric cars will come down. People need to be able to buy a vehicle that’s not polluting but gives them the same value for money,” Price said.
A new business model
“This will only come about because of technology breakthroughs, and we are part of that big breakthrough helping to meet mass adoption by reducing costs. Everything is now changing, and we are creating new ecosystems and a new business model,” Price said.
Viktor Irle, Stockholm, Sweden-based analyst with consultancy EV-volumes thinks electric cars will become much more affordable, and won’t have to become like golf carts to do it.
“There will a drastic drop in the price of electric cars, with two deciding factors. First; economies of scale. If you produce electric vehicles in big numbers like (Europe’s biggest seller the VW) Golf, costs will fall, and battery costs are coming down as well, every year. Take the Tesla Model S. The first models had a 40kWh battery and now there’s a 100 kWh one and the price is lower. The price of the battery for cars will drop from about 1/3 of the overall cost to about 15%,” Irle said.
IHS Markit’s Urquhart said electric car manufacturing costs will be brought down by use of modular design.
“Just one design of a common platform (motor, wheels, basic engineering) will be produced for use across the entire industry and the manufacturer will add its own differentiation; it will have to go at that level of scale to get the price level down,” Urquhart said.
Volkswagen has already said its Modular Electric Toolkit (MEB), the technical foundation of its upcoming family of new electric sedans and SUVs, should be accessible for the whole industry. MEB will be the basis of new vehicles including the ID.3 sedan launching in September. The platform is to be used across VW’s brands for 15 million vehicles by 2025.
Need affordable options
“It is possible that in 10 years the technologies and economies of scale will get to the point where it will cost the equivalent of say 10,000 pounds (roughly the cost of entry-level ICE cars today). It will have to because for many the cost of electric cars now is unaffordable. We need affordable options for nurses etc and people that need cars for their jobs,” Urquhart said.
“I’m confident prices will start to come down and become more competitive and attractive than at the moment,” he said.
But if the better golf cart is still the solution, another plus would be that it would, presumably, retain its original capability.