An electric car that sells for 25,000 euros (about $26,700) or less can be built profitably in Europe by 2025, according to a study by the environmental group Transport & Environment.
The affordability of electric vehicles has been a key topic in recent years, especially as Chinese automakers start to make inroads in Europe with brands such as MG (owned by SAIC) and BYD. The issue has the potential to balloon into a full-fledged trade dispute, with the EU announcing this week that it would investigate China’s domestic subsidies that critics say give cars built there an unfair advantage.
“Survey after survey shows cost to be a key barrier to a faster BEV (battery electric vehicle) adoption,” Julia Poliscanova, senior director for vehicles and e-mobility supply chains at T&E, said in the report released Thursday.
There is also a large gap in electric vehicle adoption rates, with less-wealthy southern and eastern European nation lagging far behind countries such as Norway, Germany, the Netherlands and the U.K.
The EU is mandating that only zero-emission cars can be sold after 2035; EV market share in Europe is about 15 percent, with a large jump expected only after 2025.
The sub-25,000 euro EV has become a target for automakers and experts, who say that price point would make EVs accessible for a much larger number of buyers, accelerating the transition to an all-electric market. Building them in Europe would soften opposition for those worried about the loss of domestic production.
“The 25,000 euro small BEV will be a game changer for public adoption of electric cars,” Poliscanova said in the report. “Bringing those models to market quickly and in volumes is crucial for European manufacturers to compete with Chinese rivals that are already offering cheap, small electric cars here.”
T&E said in the report that “under favorable market conditions” a small EV produced in Europe in 2025 can be priced at 25,000 euros with a 4 percent profit margin — similar to the margin on a small combustion-engine car. It would have a 40-kilowatt-hour battery using cheaper lithium-iron-phosphate (LFP) chemistry and a range of 250 to 300 km.
The sale price could increase to 31,000 euros under the “least favorable conditions,” the group said. Variables include productivity gains, battery prices, the euro/dollar exchange rate, and raw materials and semiconductor prices.
At the same time, the price of internal-combustion vehicles, depending on the same conditions, could vary from 24,000 to 29,000 euros.
The current lowest-priced EV in Europe is the China-built Dacia Spring, which starts at 20,800 euros in France. That figure drops to less than 16,000 euros with government incentives.
But China may become a less attractive production destination for European automakers. On Wednesday, the European Commission announced it would investigate Chinese subsidies for EVs, with the EU president, Ursula van der Leyen, saying that the global market is flooded with cheap Chinese cars.
A number of automakers have voiced the intention to bring a European-built EV to the market at 25,000 euros or less, but none has done so yet.
Stellantis is planning to sell the small Citroen New e-C3 made in Slovakia for 25,000 euros starting in early 2024, while Fiat will unveil a new electric model inspired by the Panda minicar in July 2024, Fiat brand CEO Olivier Francois said in an interview.
The Volkswagen Group will launch the ID2 small hatchback in 2025; VW brand CEO Thomas Schaefer said in March the automaker is aiming for a starting price of less than 25,000 euros.
Renault will launch the Renault 5 small hatchback BEV in 2024, but CEO Luca de Meo has not publicly committed to the 25,000 euro price target. At the Munich auto show last week, de Meo said the Renault 5 would be 25 to 30 percent less expensive than the compact Megane E-Tech EV — or about 26,000 to 30,000 euros.
According to a survey of 3,000 people in the T&E report, the advent of affordable small EVs would increase the share of consumers willing to buy an electric car in the next 12 months to 35 percent from 25 percent. That would equate to more than 1 million additional sales, T&E said.
However, T&E said, “given the recent automotive dynamics, it is not a guarantee that such models will be available on the European market at the speed and volume needed to accelerate access to electric mobility.”
Those dynamics include a push to sell higher-margin SUVs at the expense of small cars, T&E said, adding that the strategy has helped automakers’ revenues outpace inflation by a wide margin.
To prioritize small cars over “heavy, expensive” SUVs, T&E called for a multipronged effort that includes national vehicle taxes that penalize weight and weight-based parking charges
Measures should include stricter EV efficiency rules, taxes and subsidies.
Other keys to affordable EVs include gains in efficiency from the current 15-16 kilowatt hours per 100 km (for a Peugeot e-208) to 13-14 kWh/100 km. Those gains can come from better aerodynamics, lightweight materials, better power electronics, and the use of heat pumps and regenerative braking.
Such efficiency gains could help compensate if battery prices plateau or even increase, T&E said.