The European automakers plan to launch dozens of electric models at affordable prices next year, as they prepare for a “EV Winter” fueled by the tougher EU carbon emissions targets and fierce competition coming from China.
The big European automakers, who have been also squeezed by the falling demand, focus on recovering market share through new vehicles ahead of this week’s Paris Motor Show.
Renault CEO Luca de Meo said earlier this month, “We’re here to fight.” He was announcing a battery recycling program and plans to support Renault’s EV Business. “We face challenges everywhere. “It’s not an easy walk, but we see lots of potential.”
Renault is the only European major carmaker to not have issued an profit warning in recent times. Volkswagen, Stellantis BMW, and Mercedes-Benz all reduced their earnings estimates due to problems across multiple fronts. From intense competition, to weak European demand, and rising inventories on the US.
Next year, when the new EU emission targets are implemented, pressure will be increased on the industry. The new EU emissions targets will increase the pressure on the industry next year when they come into force.
The executives say that meeting the emission targets is more difficult because of the recent slowdown in EV sales. Consumers are becoming more cost-conscious and subsidies in large markets like Germany have been reduced.
According to AlixPartners, some carmakers (except Stellantis) have asked for targets to be diluted or delayed to avoid fines which could total €51bn collectively by 2030.
Stellantis CEO Carlos Tavares told a committee of the Italian parliament on Friday that the move to EVs, as required by rules, would increase costs for automakers.
He said: “We are adding 40 percent more costs to a system which cannot absorb a higher price because consumers do not want to pay any more.”
Henning Cosman, an analyst at Barclays, estimates that global automakers will launch over 100 EV models in Europe this year and 70 in 2025. However the lower prices needed to make sales may cause a “EV Winter” due to the lower prices.
“If you’re a consumer, it almost feels like buying an electric car today is a bad idea because you know you can get one that has a longer range and more advanced technology in the near future. “That’s the real downward spiral,” he said.
Knowing that they will be forced to sell cheaper models by 2025, European carmakers have concentrated on the higher end of the market in 2018.
This has left them less able than other manufacturers like BYD or Xpeng in China, which sell some models for €20,000 — that’s about half of the average price tag of an EV here in Europe.
Alexandre Marian, AlixPartners, said: “There may be a price-war but I don’t think the Europeans will win.”
Even without any further discounts next year, EVs will be less profitable than combustion engine models. According to Barclays, the gross margins for all models with combustion engines are 15 percentage points less than those of EVs.
Leapmotor’s Chinese partner Stellantis will display some cheaper models at the motorshow, including a car priced under €20,000.
Renault has already begun taking orders for the R5, a new electric vehicle priced at approximately €25,000. Citroen will also be exhibiting models, including the C3 Aircross Compact SUV. However, only the non-electric version is priced at €20,000.
Renault’s research shows that to meet the emission targets, EU automakers will require a market share of 20-22%. Currently, the EU carmakers are at less than 15%.
Analysts believe that the targets can be achieved if carmakers purchase emissions credits from groups who sell cleaner cars. The cost to Volkswagen and Ford – who are most behind in meeting their targets – will likely drag down their profits.
Luc Chatel of the French auto lobby PFA told RTL radio that the “industry and manufacturers are investing billions” in EVs.
He added that the industry faces a “serious threat”. “Consumers don’t follow any more. It is absurd that manufacturers will have to pay European fines in the next year.
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