Why is your electric car more expensive in Europe than in China?
European carmakers are betting on SUVs and luxury vehicles to make more profits. Cars are getting greener but more expensive: the average price of battery-powered cars has surged by 18,000€ in less than a decade
Imagine cruising down the streets in your sleek electric car, silently gliding past the gas guzzlers. For many Europeans, this scenario comes with a hefty price tag – much higher than what you would find in China. But why the big price difference? According to T&E, a watchdog in the automotive world, it's because of major European automakers' sales strategy. Basically, they're putting all their chips on SUVs and luxury vehicles to increase profits. In doing so, though, the average price of battery powered cars (BEVs) has surged by 18,000€ in less than 10 years. Without the EU setting binding electrification targets or increasing taxation on gasoline and diesel cars, this trend is not going to change.
Why are BEV's prices so high?
The average price of battery powered cars (BEVs) has surged by 18,000€ in less than 10 years and this is a fact. But why? While automotive manufacturers attribute the sluggish adoption of BEVs in the European market to consumer preference for conventional gasoline and diesel vehicles, T&E's analysis sees the reason of this reality in European automotive giants' industrial strategies. The car industry prefers to promote high-polluting car models and leave electric cars in the dust so that they can increase their short-term profits.
Learning from China
When taking a pick at China, T&E notices a stark divergence in pricing trends with the EU. Since 2015, BEV's average price has skyrocketed by 39% in Europe, while it has plummeted by 53% in China. T&E attributes this opposed trend to various factors, including China's robust battery supply chain. However, instead of intensifying efforts to bridge this pricing gap and remaining competitive with Chinese counterparts, European automakers have chosen to focus on the production and promotion of larger-sized and luxury models (D and E segment) instead of compact cars (A and B segment).
Some data on the European BEV market
To fully understand what is going on, we need to look at the dynamics in the European BEV market. According to T&E, only 17% of BEVs sold in Europe belong to the more affordable B compact segment, which brings less revenue to sellers, compared to a solid 37% of new combustion engines to be found in the same category.
Between 2018 and 2023, European automakers have introduced only 40 new battery-powered models for smaller cars, while unveiling 66 in the more upscale D and E segments. Predictably, this has led to BEV sales being higher than their gasoline and diesel counterparts only in D and E segments, which are the most expensive as well. In this way, "European carmakers are holding back the mass market adoption of EVs by not bringing affordable models", said Anna Krajinska, vehicle emissions manager at T&E. The trend is likely to remain steady this year as well. According to GlobaData, only 42 thousand cars with a price below 25,000€ are being produced this year in Europe.
How to boost BEV production and sales
As we read on T&E, one of the solutions to boost BEV production and sale in the EU could lie in electrifying the corporate car segment. This sector sells more cars than the private one, yet the latter counts 15% of BEV sales compared to corporate segment's 14%. Another solution could be increasing taxation on gasoline and diesel cars, but some countries like Germany are recalcitrant because they do not want to increase the tax burden on consumers. If the EU really wants to respect the ambitious climate targets set in the Green Deal though, T&E writes, it needs to set binding electrification targets for corporate fleets so that they can go fully electric by 2030.
