Geneva Auto Show: Electric Revolution-Too Soon For Europe?
“There will be a big market for affordable electric cars with a range of perhaps only 60 to 75 miles. The Chinese more or less specialize in these, and this might give them the chance to finally get into Europe”
Geneva 2019 is yet another auto show where we’re told the electric revolution is about to start, but we find out when we get there that it’s been delayed until next year; guaranteed.
This time though it might have begun, but the Chinese will be there first.
Sales of electric cars are certainly spurting ahead, but still from a very low base. And European Union rules forcing carmakers to produce electric cars to meet fuel efficiency regulations may be opening a sales opportunity to Chinese manufacturers which already make cheap battery powered runabouts.
According to Germany’s Center of Automotive Management (CAM), global sales of electric cars were 2.1 million in 2018 and will rise to 2.8 million in 2019.
China was the biggest market in 2018 with just over 1 million electric vehicles, Europe was second with 386,000 then came the U.S. with 359,000, according to France’s Inovev. And while we wait for lift-off, new reasons emerge as to why it won’t happen. So far the excuse has been prices are too high, range too limited, and the charging infrastructure is too patchy.
The latest electric cars on the market like the Tesla Model S, X and 3, Audi E-tron, Mercedes EQC, Jaguar I-pace and Porsche Taycan have plenty of range, but are far too expensive to make any impression on the mass market. The charging regime in Europe doesn’t amount to much.
And meanwhile new ideas emerge as to why it doesn’t really make sense to buy electric. Residual values are weak and erratic so buyers are wary. Manufacturers too are finding that making electric vehicles robs them of a huge profit stream, so that’s another reason for them to step warily.
There some examples of electric cars for the mass market in Geneva. The Honda Urban looks almost ready for the showrooms, to join the Nissan Leaf and Renault Zoe. Peugeot’s new Citycar, the 208, also comes with a battery only option. Kia launches the electric Soul. The Citroen Ami One is only a concept, but could lead the charge for really cheap urban electric runabouts.
Peter Fuss, partner at consultants EY’s Global Automotive Center in Frankfurt, Germany, said patience is required but the mass market for electric cars needs time to develop.
“The year 2019 will be an important year for which many car manufacturers have announced many new electric cars for the mass market. Currently, many of those new announced cars are still not available to buy yet. Therefore the Geneva show will not yet show evidence that the electric revolution will embrace the mass market in 2019. The mass market of electric cars will grow steadily but with low speed,” Fuss said.
Another problem for manufacturers is that because European Union regulation is forcing them to shun diesels, they won’t be in a good position to serve a sudden demand for cheap electric cars. This could be the green light for Chinese companies which currently build relatively large number of cheap electric runabouts, according to Professor Stefan Bratzel of the Center of Automotive Management (CAM).
“There will be a big market for affordable electric cars with a range of perhaps only 100 to 120 kilometers (60 to 75 miles). The Chinese more or less specialize in these low cost electric cars, and this might give them the chance to finally get into the European market,” Bratzel said.
Felipe Munoz, global automotive analyst at JATO Dynamics agrees.
“These concepts at the show are very nice, but we need them today not in three years because of the threat from China. EU CO2 rules are opening the door to China which is creating a perfect scenario for their cheap electric cars,” Munoz said.
Peter Wells, Professor of Business and Sustainability at Cardiff Business School, says electric sales are stirring but residual values area problem.
High growth phase
“While the electric car market has not yet shifted into the high-growth phase, 2019 will be a decisive year. From 2019 onward, electric cars will no longer be regarded as niche novelties for the quirky or the ecologically-motivated. The range-price equation is really looking plausible in cars like the latest Nissan Leaf. There remain some key problems,” Wells said.
“Battery supply is still constrained and is holding up deliveries. Cars like the Tesla 3, Kia Niro and Mercedes EQC cannot be built fast enough to meet the pent-up demand. Depreciation rates on older BEVs (battery electric vehicles) are still scarily high. A combination of incentives only for new cars, technology upgrades on more recent models, and uncertainty over battery longevity is decimating used EV values,” Well said.
Wells said the charging infrastructure in Europe remains unreliable. And carmakers struggle to make profits from electric cars.
Dan Coffey, Business economist at Leeds University Business School, said manufacturers gearing up for electric car production face a big financial problem.
“The old business model had two profit centers: profits from making and selling cars, and the profits from the replacement parts servicing those cars. But not only is there, as yet, no established parts market for electric cars, the technology in question does not even conduce to this kind of parallel evolution. This being so, and without a very radical change in the basic business model, absenting large state subsidies, the medium-term commercial prospects are tougher than many seem to think,” Coffey said.
This calls for new ways of building businesses.
“Mass market companies need to forward integrate into services provision and become service led manufacturers, who would retain ownership of the car but lease their fleets out to individual businesses /households on a private-use basis, and provide a range of services. This would create new profit centres, to substitute for disappearing ones, for the mass market electric car,” Coffey said.
As more European cities ban diesels and EU fuel economy regulations make it too expensive to produce small conventional cars, it may be that the little Citroen Ami One is the blueprint. With the likes of Volkswagen saying by 2025, 25% or its global sales (currently about 2% max) will be battery electric, this cheap and cheerful option may be the only viable route.