Europe Adjusts Electric Car Strategy Amidst Competition

In response to the aggressive moves by American and Chinese manufacturers, Europe is fine-tuning its approach in the electric car market, slashing prices to stay competitive during this era of significant change.

A major hurdle to the swift expansion of the electric car market and achieving the EU's goal to phase out fossil fuel cars by 2035 has been the high price tag of electric vehicles compared to traditional ones. However, this barrier is gradually diminishing, largely due to fierce competition from American and Asian automakers.

The influence of companies like Tesla and Chinese firms such as BYD has compelled European brands like Volkswagen and Renault to reduce the prices of their electric cars to below 40,000 euros. This adjustment is crucial for European brands to withstand the arrival of Chinese electric cars like BYD models, known for their impressive product-to-price ratio, and the decreasing prices of Tesla models, which still ranks as the second-best seller of electric cars globally (although overtaken by BYD in 2023).

Strategies in Response to Competition

In the face of dwindling state aid and subsidies aimed at promoting the construction and purchase of electric cars, exemplified by Volkswagen in Germany, the brand opted to introduce its own "environmental vouchers" offering around 7,000 euros in reductions on models like the ID3. This means the ID3 can now be acquired from 34,630 euros (for the version with the 58 kWh battery).

The ID3, Volkswagen's contender against the Tesla Model 3, faced criticism for high prices and the removal of its most economical version. Originally available with a 77 kWh battery and a 58 kWh battery (withdrawn but set to return in 2024), the discounted version with the 77 kWh battery will have a base price of 37,595 euros.

Renault, on its part, opted to lower the price of the Mégane E-Tech (the 60 kWh and 220 hp model) by 4,700 euros, making it more competitive at 38,880 euros. This move positions it to go head-to-head with Chinese models like the BYD Dolphin or the MG4 Electric from the Chinese brand SAIC Motors. Additionally, Renault announced the impending release of the Renault Scenic E-Tech, equipped with a 60 kWh battery and priced around 40,000 euros.

Other European brands are gearing up to face the competitive pricing of Chinese models, including Citroën with its Citroën ë-C3 model, priced at around 23,000 euros. The new version, scheduled for release in 2025, is expected to be even more affordable at around 20,000 euros.

A Price Battle Yet to Be Won

Despite initiatives like the MOVES III plan and the efforts of major car manufacturers, electric car prices still remain relatively high compared to traditional combustion engine vehicles. In 2020, the average price of a gasoline car was $36,000, while electric cars were hovering around $55,000. Three years later, electric car prices have dropped by about $15,000, largely due to the significant entry of Chinese cars into the global market.

In 2024, the challenge is to bring electric car prices on par with gasoline cars and ensure that European models can compete effectively with BYD and Tesla offerings.