Stagnation and growth: the European EV market: Why cheaper EVs are coming in 2025

[Biker16]

Stagnation and growth: the European EV… | Transport & Environment

Download the Briefing HERE

This could explain Ford's perplexing Strategy when it comes to EV pricing.  What if Ford intentionally holds back sales of EVs in 2024 to meet the Co2 Targets in 2025? This would explain the curious pricing and the timing to the leunch of their first affordable EV the Puma. 

Quote

It is a myth that electric car demand is slowing around Europe. The current stagnation of the EV market has been expected for years. It is the result of: 

 • The stop-and-go design of the EU car CO₂ targets (in 5 year steps); 

 • Carmakers’ strategy to hold back the sales of EVs until it is required by the regulation, prioritising profits from ICEs and large, expensive EV models in the meantime.

In the stagnation phase, carmakers prioritise short-term profits through the sale of high-margin, expensive EVs and by pushing EV sales in the following year when they need the new models to reach the EU car CO₂ targets. The disproportionate focus of carmakers towards larger, more premium models has resulted in high prices for EVs in Europe which has slowed down EV sales as a result. In 2021, the average price of EVs was below €30,000 and the share of large EVs sales was close to 40%. By early 2024, the average price had increased by more than €10,000 and the share of large EVs sold increased to around 60%.

In the next growth phase from 2025 onwards, electric car sales will pick up as carmakers need to prioritise EV sales to meet the next car CO₂ target kicks-in. Carmakers make a shift towards mass-market affordable EVs as they plan to launch ten affordable Made-in-Europe EV models in the next couple of years.
 

[Rick73]

Seems like a lot of speculation to me.  The first “stagnation” period was actually part of early “exponential” growth everyone seemed to mention to support beginning of BEV growth.  The second stagnation period does seem to show volume leveling off, but what supports a sudden return to exponential growth again?  I must be missing something.

[Biker16]

 

4 hours ago, Rick73 said:

Seems like a lot of speculation to me.  The first “stagnation” period was actually part of early “exponential” growth everyone seemed to mention to support beginning of BEV growth.  The second stagnation period does seem to show volume leveling off, but what supports a sudden return to exponential growth again?  I must be missing something.

I wanted to keep my opinion out of this, but this is what I see happening.

2022-2024 EU EV targets increased from 10% (2021) to 15% (2024) 
2025 EU EV target increases from 15% (2024) to 24% (2025), a 9% jump in one year.

In 2024, Legacy automakers will meet the CO2 Standards with their mix of EVs, PHEVs, and HEVs. Due to the regulatory environment, OEMs are focused on selling profitable, higher-margin EVs. 

In 2025, OEMs will only be able to meet the EU standard with drastically increasing EV sales. This will force OEMs to offer More affordable EVs, like the Puma-E, and lower the price of Existing EVs like the ID.4, ID.3, Capri, Etc. The OEMs hope that the lower costs for batteries and other components will allow lower prices without destroying margins. VW for example, is planning the launch of the low-cost MEB platform ( Id.2 Hatch and CUV) in 2025 and a major refresh of MEB vehicles in 2026. VW will also open its largest battery plant in 2025. 

IMO, Ford is hedging in Europe with the VW platform and non-optimized ICE-based EV platforms until the Low-cost EV Platform is ready. 

[jpd80]

VW has a huge problem, it’s MEB platform was designed to include a serious amount of manual Labor assembly

thanks to German Autoworker Union and a good portion of VAG being owned by Lower Saxony government.

VW employs a massive number of German workers who want a decent pay rise, those workers are now being

told that the equivalent of three plants production has to be eliminated…..this is going to get ugly.

 

The horrible irony here is that VAG is trying to do the best for everyone and seems to be pleasing no one 

I sure hope it gets this sorted because new vehicles or not, efficiency and a happy work force is critical

to success in 2025 and 2026……the Chinese wolf is at the door.

Edited December 11, 2024 by jpd80

[jpd80]

Also, I would love to think that Ford is working to some ingenious master plan of holding back BEV production

biut the realist in me says that once again, Ford Europe forged ahead and tried its best with an imperfect 

plan thanks to short sighted decision to use VW MEB platform signed up in the previous decade when

much  of the BEV battery  and vehicle development was still struggling to be affordable. I hope Ford

has success with its new BEVs - Puma, Explorer and Capri, they need to have skin in the game and

those vehicles at least get them out in front of buyers.

Edited December 11, 2024 by jpd80

[morgan20]

23 hours ago, Rick73 said:

but what supports a sudden return to exponential growth again

 

Lots of affordable EV models being introduced combined with Euro 7 and EU 2023/851 emissions standards taking effect. Biker16 has a good explanation above

[Rick73]

2 hours ago, morgan20 said:

 

Lots of affordable EV models being introduced combined with Euro 7 and EU 2023/851 emissions standards taking effect. Biker16 has a good explanation above

You’re preaching to the choir on need for affordable BEVs, which I’ve  opined are needed badly since joining this forum, but most “experts” like CEO of Lucid, and also Tesla’s Musk to a lesser degree, have stated that low-cost desirable battery-electric vehicles that buyers will actually purchase can not be manufactured  profitably.  I like the above-mentioned VW ID.2all concept but want to see more on costs and performance data.  Time will tell if it appeals to the masses without money-losing incentives.

 

There’s a significant difference between “more affordable” as mentioned by Biker16 and actually being affordable.  I’m not sure how that difference should be defined, but in free markets a good place to draw the line between the two is price parity.  We’re not quite there yet.  Obviously we are not dealing with free markets due to mandates, but as long as a large segment of population can still choose a lower-price ICE or HEV, they will continue to skip BEVs as an option.  I know mandates and regulations in general can force people into buying more expensive vehicles, but can also incentivize them to change the mandates when they affect family budgets.  Some of that may happen in USA in 2025 under Trump administration, starting with eliminating tax credit.  

 

Battery costs are often blamed as main BEV hurdle but that’s starting to sound more like an excuse to me; at least if BEVs are not viewed as a direct equivalent to their ICE or HEV counterparts.  IMO marketing needs to present affordable BEVs in a completely different light to discourage buyers from making direct comparisons.  IIRC modern BEVs were first marketed by Tesla for having performance that exceeded that of ICE, and it worked at very high-end costs.  Second wave marketed BEVs as more affordable overall due to fuel cost savings and other cost advantages, but that hasn’t materialized for various reasons.  The opposite in fact probably contributed to growth stagnation over last 3 years.  Buyers need a reason to want a BEV over ICE or HEV, and I don’t see a clear one right now other than government enforcement (i.e. — coercion).  It’s better if manufacturers build cars people want to buy rather than forced.

[GlenMiller23]

Europe started a trade war with China by imposing high duties on them, against the backdrop of cheap Chinese electric cars, since their cars cost one and a half to two times more. Plus, their changes in politics greatly affect everything, after January the situation between Europe-America-China will gradually become clearer and it will be possible to estimate changes in the markets.

[Sherminator98]

19 hours ago, Rick73 said:

The opposite in fact probably contributed to growth stagnation over last 3 years.  Buyers need a reason to want a BEV over ICE or HEV, and I don’t see a clear one right now other than government enforcement (i.e. — coercion).  It’s better if manufacturers build cars people want to buy rather than forced.

 

Your ignoring the other factors at play here-mostly Inflation and other factors like demographics.

 

The other issue is EV have an image issue with some buyers due to all the noise and ignorance of perspective buyers that don't have a clue. If you can charge at home, an EV should work for the vast majority of people, but buyers expect an EV to work exactly like a gas powered car. 

[CurtisH]

1 hour ago, Sherminator98 said:

If you can charge at home, an EV should work for the vast majority of people, but buyers expect an EV to work exactly like a gas powered car. 

I see this point made quite a bit.  However, many people correctly see the compromises they have to make because an EV doesn’t work exactly like a gas powered car.  When we bought the Corsair last year, there is no way we would have considered an EV.  That will be the vehicle we use to take trips and our trips take us to somewhat remote areas sometimes.  Charging an EV would be problematic.  
 

My next vehicle purchase will probably be a truck.  I won’t be towing a large trailer or taking it on long trips.  So, the compromises of an EV won’t affect me.  If Ford has their small EV truck out by then, I will certainly consider it.  I don’t expect to make that purchase for another 6 years, so Ford has time to get it right. 

[Sherminator98]

53 minutes ago, CurtisH said:

 That will be the vehicle we use to take trips and our trips take us to somewhat remote areas sometimes.  Charging an EV would be problematic.  

 

In the grand scheme of things, how many times do you actually do that? 

I know I live in the Northeast, so a "long" drive is about 3 hours and in other parts of the country, that same "long" drive is say 5 hours-in the midwest where things are more spread out. Charging in my area is decent to good, but we have about 10-20% EV penetration

 

I'll most likely go EV with my next car, but I doubt I'll be getting anything for another 5 years or so-I don't even have 20K on my Bronco and it will be 3 years in about 6 months. I go into the office 2x a week and my total commute is under 30 miles. 

[Rick73]

51 minutes ago, CurtisH said:

I see this point made quite a bit.  However, many people correctly see the compromises they have to make because an EV doesn’t work exactly like a gas powered car.  When we bought the Corsair last year, there is no way we would have considered an EV.  That will be the vehicle we use to take trips and our trips take us to somewhat remote areas sometimes.  Charging an EV would be problematic.  
 

My next vehicle purchase will probably be a truck.  I won’t be towing a large trailer or taking it on long trips.  So, the compromises of an EV won’t affect me.  If Ford has their small EV truck out by then, I will certainly consider it.  I don’t expect to make that purchase for another 6 years, so Ford has time to get it right. 

Exactly, what matters most is what buyers think when choosing, not what any of us may or may not think about pros and cons of BEV ownership.  Granted, anyone can try to educate and or influence others with our own version of the truth, but in the end that’s probably going to carry very little weight.

 

As example, my son loves his Tesla and says he will get another BEV to replace it, but when it came to buying a new pickup recently, did not consider a BEV at all.  In his case it’s not lack of information or knowledge, rather that a BEV pickup either couldn’t pull their trailer very far, or else he would have to spend a small fortune for a pickup with over 200 kWh battery.  If we remain objective, it’s much easier to see why adoption of electric pickups is lagging thus far.  Even if he had spent twice as much on a new BEV Silverado, charging while towing is a hassle.  It’s just not worth it.

[akirby]

11 minutes ago, Sherminator98 said:

In the grand scheme of things, how many times do you actually do that? 
 

It doesn’t matter if it’s once a year or 10 times a year.  People don’t want the inconvenience especially on vacation.  Especially in remote areas where the nearest charger might be 50 miles away.

[Rick73]

My 2 cents, and that’s all it’s worth, is that affordability of a viable car remains key to mass adoption.  And by viable I mean a design many buyers (but not all) will consider an acceptable compromise, not what they would want in a “perfect” world.  Trying to please everyone is a waste of time and money, yet seems to be what legacy automakers have attempted.

 

Since many buyers are unwilling to compromise on vehicle size, aerodynamic shape, range, etc., it’s best to ignore them initially and focus on buyers willing to compromise; and therefore provide vehicles similar to what has sold best for years — Tesla Models Y and 3.  To penetrate a larger segment of market, even Tesla knows lower costs are needed.

 

We shouldn’t have to wait much longer for lower-cost BEVs to arrive in order to test affordability premise, assuming Tesla plans to introduce a viable lower-cost vehicle in first half of 2025 is for real.

 

It has been reported price will be $30k after credit, or $37.5k if tax credit is eliminated.  That’s roughly $5k lower than lowest-cost present Model 3.  I personally expect it will mostly be a shorter-range, less powerful, and decontented Model 3; though I could easily be off.  Regardless, since Model 3 sells relatively well for a BEV, a cheaper version or something similar should confirm if much greater numbers of buyers will flock to purchase based solely or mostly on lower price.

[jpd80]

Not meaning to restate what Biker said earlier in the thread (agree with most of it).
With regards BEV roll out and sales, it’s wise to not conflate US market conditions with those of Europe.

American buyers have lots of choices on the ICE side coupled with relatively low fuel prices vs Europe.

Also, Europe and UK are forging ahead with tougher vehicle requirements that are forcing manufacturers 

to make more BEVs available than perhaps are practical/economical so perhaps companies like VAG

and Stellantis , maybe Ford too has to wear the costs of building sufficient BEV customers  to comply?

 

Lower battery prices ar coming and that will be a huge help to manufacturers selling affordable BEVs

so I remain open on BEV uptake depending on how quickly battery  technology can pivot to lower costs.

Do that and the equation shifts for loads of  potential buyers.

[Rick73]

On 12/13/2024 at 6:15 PM, jpd80 said:

Lower battery prices ar coming and that will be a huge help to manufacturers selling affordable BEVs

so I remain open on BEV uptake depending on how quickly battery  technology can pivot to lower costs.

Do that and the equation shifts for loads of  potential buyers.

Agree completely lower battery prices should help, but I’m a little concerned that costs have already dropped a lot, leaving much less to reduce.  As example, if the most affordable cars have batteries around 40 kWh and costs are in order of $5,000 or less at cell level, how much more can cheaper batteries really help?  Diminishing returns suggests that even cutting battery prices in half won’t make a +/- $30k entry-level car that much cheaper; maybe +/- 10% lower?  Would that be enough to improve BEV adoption rate significantly?

 

Diminishing returns will also limit additional weight savings in a similar manner.  Cells for a 40 kWh battery probably weigh in order of 400 pounds today, so even if energy density is doubled, vehicle total weight savings won’t be drastic, though lighter battery will reduce other weight as well.  I remain cautiously optimistic on battery technologies but would like to see much greater gains in vehicle efficiency; both in weight and aerodynamics.  That seems the easiest way to improve practicality at an affordable cost.

[jpd80]

Farley made a big thing out of large batteries in large BEVs being less profitable to make,

so clearly, the pursuit of smaller BEVs was all about finding the sweet spot for max profit.

(duh, best use of batteries).

 

Notice how carmakers make a big thing of rising costs but never mention when commodities fall,

of course not, why would you tell your customers you’re not passing on savings….

Edited December 15, 2024 by jpd80

[akirby]

33 minutes ago, jpd80 said:

Notice how carmakers make a big thing of rising costs but never mention when commodities fall,

of course not, why would you tell your customers you’re not passing on savings….

Name one business that announces price cuts due to internal cost savings not driven by competition.

[jpd80]

9 hours ago, akirby said:

Name one business that announces price cuts due to internal cost savings not driven by competition.

Walmart but even then, your point is perfectly made….

Edited December 16, 2024 by jpd80

[morgan20]

On 12/15/2024 at 3:33 PM, akirby said:

Name one business that announces price cuts due to internal cost savings not driven by competition.

 

ALDI

 

[akirby]

2 hours ago, morgan20 said:

 

ALDI

 

Nice try but that’s clearly a sale on a few items for advertisement purposes.

[morgan20]

9 hours ago, akirby said:

Nice try but that’s clearly a sale on a few items for advertisement purposes.

 

While it's true that example highlighted Thanksgiving food items this year, ALDI's overall business philosophy is to pass internal cost savings to its customers. They do this kind of thing throughout year, on all kinds of merchandise

 

ALDI says its lean business model, which includes its cart deposit system and the fact that products are displayed on the shelves in the boxes they are shipped in, allows the store to save on operating expenses. It can then pass those savings along to shoppers. The ALDI way of doing business is successful enough that ALDI is adding 800 new stores in the U.S. during the next five years.

[akirby]

2 hours ago, morgan20 said:

 

While it's true that example highlighted Thanksgiving food items this year, ALDI's overall business philosophy is to pass internal cost savings to its customers. They do this kind of thing throughout year, on all kinds of merchandise

 

ALDI says its lean business model, which includes its cart deposit system and the fact that products are displayed on the shelves in the boxes they are shipped in, allows the store to save on operating expenses. It can then pass those savings along to shoppers. The ALDI way of doing business is successful enough that ALDI is adding 800 new stores in the U.S. during the next five years.

But again they’re doing that to be more competitive on pricing and therefore get more revenue.

 

The question is this:  if Aldi is currently selling a product that’s already priced below the competition and they’re selling all they can get and they find a cost savings of $0.50 per unit do you think they would lower the price by $0.50 or pocket the extra profit?  No good business manager would turn down profit for no reason.