High Price, Limited Performance Of Europe Electric Cars China Opportunity?
“manufacturers must embrace this niche or face being wiped out by super low-cost Chinese brands when the latter can meet European standards”
The high price of so-called “affordable” electric vehicles in Europe and their often pitiful highway cruising performance might make some hard-up buyers grit their teeth, admit the unthinkable and opt for a mini battery-powered vehicle because the alternative is a scooter, a bike, or even worse, the tube or bus.
And the possibility of a cheap but limited little electric car might well lead to dancing in the streets in Europe’s poorest countries, which have so far been left out of the electric revolution.
The cheapest electric vehicles like the Renault Zoe, and upcoming offerings like the Fiat 500E and perhaps the expected Volkswagen ID.2 start at around €20,000 ($24,300 after tax). About twice the price of an entry-level gasoline-powered car. Even small cars and SUVs like the Vauxhall/Opel Corsa and the MG ZS EV cost from around €30,000 ($36,500). These vehicles all come with impressive claims for range, which suddenly dissolve when the vehicle is asked to undertake a highway journey at normal cruising speeds.
The speed limit across Europe is mainly 130 km/h, about 80 mph, and this is the accepted legal cruising mode on many highways, except of course in Germany where there are still long sections with no speed limit. You will see every type of sedan and SUV, from the cheapest to most expensive cruising around this speed. But the impact on available mileage at these speeds on battery electric vehicles (BEV) is catastrophic. Often you will lose miles at twice the rate or more of the actual miles being travelled.
So these “affordable” cars aren’t the equivalent of regular gasoline or diesel powered cars. They are effectively city cars, and very expensive considering their limited ability. Suddenly a small car like the Wuling Hong Guang Mini EV from China makes lots of sense. It can reach about 60 mph, probably downhill with a following wind, but quite adequate in town and country driving. Base models have a range of about 70 miles. You can make an average daily commute, said to be about 24 miles in Europe, do the shopping and take the children to school. If you’re not convinced yet, try this. The base price is $4,400. That number will be enough for many Europeans with average earnings to swallow their pride. And there won’t be much of that because the little Hong Guang Mini EV looks cute and believable.
Dancing in the streets
That’s the price now in China and it’s likely to be a bit more expensive if it came to Europe, but will still probably cause dancing in the streets of eastern Europe.
Groupe PSA of France’s Citroen is about to launch its cheap and cute little Ami, electric city car, although this in its initial form is too slow (28 mph), has only 2 seats, a range of 43 miles, and costs €6,000 ($7,300).
The idea that small is the answer isn’t exciting some European analysts.
“We don’t see a switch by European carmakers into making these little electric cars happening,” said Viktor Irle, Stockholm, Sweden-based analyst with consultancy EV-volumes.
Irle said small cars like this won’t be profitable.
That’s probably true of traditional European manufacturers, but likely not Chinese ones.
“The Citroen Ami will not be a big seller. Europeans want a car – not two – that gives them flexibility. If you have a small car, unable to go on highways, the use is very limited. Big cities like Paris, Berlin and Rome could see some sales of these. Generally, car buyers move up in segments. So Ami is likely going to replace scooters and mopeds and motorcycles in our analysis,” Irle said.
But this assumes that “affordable” electric cars can match gasoline or diesel cars on the highway, and that isn’t the case in my experience. It remains to be seen if the latest electric cars, like the Volkswagen ID.3, perform adequately at motorway cruising.
IHS Markit auto analyst Ian Fletcher doesn’t see a shift downmarket either.
“Volumes of traditional (city car) segment vehicles have been retreating anyway. (Manufacturers) have been pulling out or reducing their exposure to this category and we see this continuing. This is partly related to the difficulty making the financials stack up compared to something larger, and recently this has not been helped by meeting new regulations in the (EU) region, particularly those for (CO2) emissions. Customers are also less interested buying something of this size as well,” Fletcher said.
2% by 2030
Fletcher said IHS Markit predicts city cars will make up just over 1% of the European market in 2025, and just under 2% by 2030.
Fletcher reckons price won’t be a factor because leasing plans make new cars more affordable. Sales growth will come from electrifying small and medium sized family cars.
“We see far greater BEV volume growth in (VW Polo and VW Golf equivalent) segments, which are the biggest by volume currently anyway. By 2025, B segment BEVs will be around 6.5% of the entire market and 9.5% by 2030, while C segment BEVs will be around 7% and 12.5%, respectively. Obviously, there is an argument with regards to the purchase cost, but I think fewer and fewer people are looking at that now. It is more about the affordability on a monthly basis through a leasing plan or similar,” Fletcher said.
But the Hong Guang Mini EV has a been a remarkable success so far in China, which of course won’t necessarily translate to Europe.
“This new battery electric vehicle has taken the (Chinese) market by storm, breaking all sales expectations since its launch,” said LMC Automotive analyst Alan Kang.
The Hong Guang MINI EV, is a two-door micro electric vehicle launched by a joint venture between General Motors and SAIC.
“The diminutive model’s eye-catching design gives it a deceptively expensive look, something that has undoubtedly contributed to its surprisingly robust performance. In September, only its 4th month on the market, the Hong Guang Mini EV racked up sales in excess of 20,000, propelling it to the top of China’s electric vehicle market,” Kang said.
More than adequate
“A range choice of between (70 and 100 miles) is more than adequate for the needs of its target audience. And less powerful battery translates to a lower sticker price,” Kang said.
In a recent interview, David Bailey, Professor of Business Economics at the Birmingham Business School, said he believes a serious threat from China is likely in this segment and Europeans must gear up to meet it.
“European manufacturers certainly need to embrace this niche or face being wiped out in this segment by super low-cost Chinese brands when the latter can meet European crash safety standards,” Bailey said.
LMC Automotive’s Kang agrees.
“I am not sure whether Hong Guang Mini EV will go to Europe market now, for I don’t know whether the model can meet the regulations and standards of Europe market. But I agree with you that such little Mini EVs with cheap prices but good design might also be welcome in the European market, if they can meet the regulations and keep same low price at the same time. It would be just a commuting tool, that does everything you need to commute, shop and take the kids to school, as you said,” according to Kang.
Germans and relatively well-off western Europeans might be tempted to scoff at these limited little electric vehicles, but in the east they may well be seen as a godsend. According to a survey by the European Automobile Manufacturers association, known by its French acronym ACEA, in the world of electric car ownership there is a deep divide between the haves and have-nots. ACEA said in 2019, 3% of new cars sold across the EU were electrically-chargeable, but the comparison between rich and poor, east and west was stark. The poorest GDP per head country was Estonia at €21,160 ($25,652) with an electrically-chargeable car market share of 0.3%. The richest, Germany (€41,510-$50,332) had a 3.0% market share.
- Estonia – 0.3% (GDP of €21,160)
- Lithuania – 0.4% (GDP of €17,340)
- Slovakia – 0.4% (GDP of €17,270)
- Greece – 0.4% (GDP of €17,500)
- Poland – 0.5% (GDP of €13,780)
- Germany – 3.0% (GDP of €41,510)
- United Kingdom – 3.1% (GDP of €37,780)
- France – 2.8% (GDP of €35,960)
- Italy – 0.9% (GDP of €29,610)
- Spain – 1.4% ECVs (GDP of €26,440)
No doubt Chinese manufacturers have already figured this out and will be cranking up sales campaigns in Tallinn, Vilnius, Bratislava, Athens and Warsaw.