The European automotive industry is experiencing a decisive turning point in its history. Faced with the growth of electric mobility, European manufacturers face a serious challenge: to make electric vehicles available to the general public while keeping them competitive against Chinese competition.

Europe has long avoided cheap Chinese competition, which has already wreaked havoc in other sectors such as textiles and smartphones. However, the car is no longer sparing, as evidenced by China’s strong presence at this year’s Munich Motor Show.

A new price war?

China, a pioneer in electrification for nearly a decade, is now consolidating significant technological progress with competitive labor costs, especially in its own market. For some models in Europe, this applies a little less, particularly due to taxes.

European governments also have a role to play in this complex equation. They are calling on manufacturers on the continent to make electric mobility affordable by phasing out new thermal or hybrid vehicles by 2035.

The issue of prices remains key. In China, “Electric cars are often sold at a price 60% lower than in Germany”, according to automotive industry expert Ferdinand Dudenhoffer. This cost difference is a serious challenge for European manufacturers.

MG, which went under the Chinese flag in 2007 through SAIC, offers bargain prices around €30,000 without eco bonuses for its entry-level models. The manufacturer benefits from the reputation of the old Western brand and the competitiveness of the Chinese market.

Chinese brands gained positions in Western Europe, p “8% of the electric car market in the first half of this year, while in 2019 there were almost none”, according to analyst Matthias Schmidt. BYD, China’s leading electric vehicle manufacturer, is expected to increase its presence in the European market from the second half of 2023.

What are European manufacturers preparing?

Faced with fierce competition, European manufacturers are trying to reduce production costs and offer more affordable electric models. Even brands like Mercedes, which have traditionally focused on the premium segment, are looking to make electrics “affordable.”

Volkswagen announced the €25,000 ID.2, expected in 2025, and a €20,000 version in 2027. Stellantis is betting on an electric Citroën C3, while Renault will launch an R5 city car at a price below €30,000 after revising its price estimates since Losange announced a price below €25,000 a few months ago.

The goal is clear: “the more electric models, the greater the effect of scale, which should contribute to lower prices”– explained the head of Volkswagen, Oliver Blume.

However, it promises to be complex, in particular, the transition to affordable electric cars “due to the economic downturn, which could lead to a 12% drop in electric car market share in September”according to Ferdinand Dudenhoffer.

Europe is preparing weapons

In France, the government is considering an offer to rent an electric car at an “affordable price”. target €100 per month subject to income verification. France is also exploring mechanisms to favor national electric vehicles, using an “ecological score” for subsidies. This particular bonus is due to take effect in 2024.

In Germany, where Volkswagen, BMW and Mercedes rule, bonuses on purchase are no longer considered a sustainable solution. The government reduced the environmental bonus this year and plans to phase it out by 2025. to encourage manufacturers to sell more affordable electric cars.

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