Europe Needs Small, Cheap Electric Cars To Thwart China

The European auto industry is making the wrong kind of electric cars and unless it makes a quick U-turn, oblivion beckons.

If Europe doesn’t wake up soon, not only will its mass-market players be decimated, even the likes of Mercedes, BMW and Audi may succumb.

The industry is making a basic mistake by offering overweight, hugely expensive behemoths when it should embrace electric car strengths and switch to cheap, lightweight runabouts. European manufacturers need to embrace the advantages of electric cars and drop this doomed and expensive race to make them perform just like traditional ones.

The technology calls for a radical new approach to mobility, not this pointless race to reinvent the internal combustion engine (ICE) vehicle with a battery. The harder the industry tries, the bigger the battery becomes, the more scarce resources are consumed and carbon dioxide (CO2) emitted. The industry is aware that electric vehicles need to be “affordable”, yet it deceives itself that the target of a €25,000 after tax ($26,700) electric vehicle makes them within reach of average wage earners.

That’s wrong.

The target needs to be closer to €10,000 ($10,700). If the industry fails to deliver, it will be overwhelmed by terrific little so-called “entry-level” cars from China. The current controversy alleging Europe is suffering because of subsidized competition from China would look like a local skirmish.

Electric cars are terrific for local mobility but hopeless over long distances. Small electric cars can perform perhaps 90% of all the jobs motorists require. A small electric vehicle with 100 miles of range, 60 mph maximum speed, enough room for 2 adults and 2 children would accomplish all the usual tasks of the school run, shopping, and commuting. That leaves the open question of long, high-speed journeys. In a sane world, there would be room for a small proportion of diesel cars. But expect authorities to opt for 55 mph speed limits on motorways. In Europe it's just over 80 mph.

Ironically, even the most expensive EVs today are really town cars in disguise because they fail miserably as long-distance cruisers. Range disappears at an alarming rate at speeds over 60 mph. This includes Chinese EVs with the latest battery technology. You may have noticed in hot weather, big, expensive electric cars crawling along in the slow lane on motorways slip-streaming the trucks, windows down, air conditioning and media systems turned off, hoping to reach the next charging station before the battery expires.

Europe needs to raise its game by designing cars for the electric age, and the pressure is mounting. After 2025, EU CO2 rules tighten and electric cars must take an ever-increasing proportion of total sales. By 2035 all new EU car sales must be electric. In Britain it’s 2030.

Small cars like the Chinese Wuling Bingo and BYD Seagull (poised in the wings to invade Europe) have much smaller batteries and could be charged overnight from regular power points. Because they will never be used for long journeys, they would not require access to an expensive charging network. They are already on sale in China for much less than €10,000.

Stellantis CEO Carlos Tavares has made the point powerfully, saying if average wage earners are priced out of personal transportation and cars are only affordable for the rich, there will be political trouble.

Europe’s industry has been caught napping, said Peter Wells, Professor of Business and Sustainability at Cardiff Business School.

“Europe is not ready to respond. It expected the pace of change to be slower and cascade down slowly to the mass market as with previous technical improvements like ABS (braking), computerized driver aids, Sat Nav etc. That was the model in the minds of the industry, but the pace of change has overtaken them,” Wells said in an interview.

“Europe is 3 to 4 years behind the pace on the key small to medium-sized volume market segments. There’s not enough product and it’s too expensive,” Wells said.

Currently, the cheapest electric cars start at close to €30,000 ($32,000). Before the Covid health emergency shut down the industry, new entry-level ICE cars could be bought for close to €10,000. But EU regulations have priced out of the market little cars like the Fiat 500, Ford Ka, Citroen C1, Peugeot 108, SEAT Mii, and Renault Twingo.

What about cheap electric cars known as quadricycles like the Citroen Ami and Microlino?

“The Ami is a very nice urban car, but it’s slow and you look massively vulnerable in amongst those big heavy cars running around our cities. Cars like the Wuling Bingo look like a good compromise and making cars like these would be a return to the tradition of European mass production of small cars,” Wells said.

Pedro Pacheco, senior research director at Gartner Group, is more positive about the performance of Europeans in their race to replace ICE vehicles. He also reckons the entry-level is less important now as buyers embrace big SUVs.

“However, looking at the future, there will be about 18% of car buyers in Europe that will stick to (small cars). In those, the Chinese makers will have the upper hand due to the vast economies of scale, close relationship with local battery manufacturers and also due to a technology lead in the battery space,” Pacheco said in an email exchange.

“For instance, the Sodium-Ion battery already deployed by BYD shows promising results in terms of affordability. Range has never been a major (concern) for (small cars), hence an automaker with a more affordable battery tech like Na-ion or LFP, plus good expertize in vehicle energy efficiency increase will be able to hit €20,000 ($21,350) within this decade,” Pacheco said.

Market researcher Jefferies forecasts that BEV annual sales in Europe will surge to 9.3 million in 2030, up from 750,000 in 2020, 1.6 million in 2022 and 4.8 million in 2025. These targets won’t be achieved unless affordable vehicles are available.

That would be a truly heroic increase and some experts reckon there’s no chance of reaching the all-electric targets set for Britain in 2030 and the EU in 2035.

Professor Gautam Kalghatgi, Fellow of the Royal Academy of Engineering, in a submission to the U.K. Parliament’s Committee on Transport, said Britain (and other states too) won’t be able to produce enough electricity to charge all its electric cars, while such huge demand will overwhelm the supply of crucial rare materials. He wants to broaden the approach to transport.

“Pursuing a single (electric) solution for future transport will be wholly destructive. All technologies relevant to transport including battery electric, ICE, Hybrids, fuel cells, alternative fuels, other policies like demand management should be honestly assessed on a life-cycle basis, sensibly deployed and continuously improved,” Kalghatgi told the committee. Hybrids offer the best options, Kalghatgi said.

Majority opinion though is geared up for an all-electric world, and Europe has an existential crisis to face down, said Cardiff Business Schools’ Wells.

“We are at a crucial place and we need to be able to grow into the mass market otherwise we’ll find one set of rules for the rich and not much for the poor. We have to be able to develop vehicles that are affordable and help everyday lives,” Wells said.

“If Europe can’t do that, China will decimate the mass production industry. I don’t think many of the specialists like Audi, BMW and Mercedes will survive; I don’t think the market will be big enough to cater for them all. We need to have a broad base of production in Europe that is affordable and electrified. And we have to change our mobility in a low carbon and low energy world,” Wells said.