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Seeking frugality – Pricking the BEV balloon, Part 1

IAIN ROBERTSON

BMW-iX-4
BMW-iX

Confusion exists across the new car scene, explains Iain Robertson, with diesel owners sniffing at Electric Vehicles, as an alternative to more recent efficient petrols, but eco-protection has gained significant high ground as the new car scene barrels towards an ICE (Internal Combustion Engine) ban in 2030. This the first part of a new series aimed at providing some answers.

Believe the hype and you believe that BEVs (Battery Electric Vehicles) are the be-all-and-end-all for transportation’s future. Not for the first time in this series of features will we touch on their relevance. Yet, BEVs are not new. They have been part of our motorised history since the outset, even though, in reality, the technology has not altered much beyond an electric motor (or up to three of them) and a storage battery system.

Recognised as doyens of efficiency by governments worldwide, BEVs can get power to tarmac more efficaciously than any fossil-fuelled vehicle. Yet, myopia is a renowned governmental condition and little thought has been applied to either refuelling/recharging infrastructures, issues such as range anxiety and environmental pressures, let alone the largest chestnut of them all, runaway pricing schedules. Come 2030 (on the present timeline) and the prospect of 2m annual UK registrations of tax-free BEVs into a car parc of around 30m ICEs is going to prove difficult to manage.

AT-Vauxhall-PHEV
AT-Vauxhall-PHEV

Intriguingly, JATO Dynamics, a company gathering information on the motor industry, has just shared its latest report on the evolution of the electric vehicle markets in China, the US and Europe. Entitled ‘EVs – A pricing challenge’, it includes JATO’s data and insights, while exploring BEV pricing over the past decade, alongside the impact of government incentives on the growth across those markets.

While governments and policy-makers have undoubtedly become influenced increasingly by environmental issues and the green agenda in recent times, analysis in the report finds that not enough is being done to produce affordable EVs across several markets. Although the pricing of BEVs in China, presently the world’s largest market, has fallen significantly by almost half (47%) since 2011, US and European markets have seen BEV prices escalate over the same time period, by 38% and 28% respectively.

Apart from state-controlled low wage policies, China’s success in producing affordable BEVs lies with a number of factors, including its government’s decision to invest heavily in the domestic market from as early as 2009. Today, consumers in China can buy a brand-new BEV for as little as €uros3,700. By way of stark contrast, the average retail price for a BEV in the US continues to rise faster than any other major global market and now stands at €uros36,200, up from €uros26,200 in 2011 (with the current exchange rate of 1.17 €uros per Pound Sterling).

Audi-e-tron-18
Audi-e-tron-18

However, average retail prices today are highest in Europe. In May 2021, BEVs were on average 52% costlier than ICE cars in the UK, and 54% more expensive in the Netherlands. In Germany, the average retail price of a BEV is €uros39,755 compared to €36,979 for ICE vehicles. Norway’s significantly smaller market is the only exception, with the average retail price for BEVs being €44,500 compared to €53,000 for ICE cars.

To date, government-led incentives have been perceived as an essential factor supporting the automotive industry, as a means to offset the price gap between traditional cars and BEVs. China’s commitment to the development of affordable BEVs has strengthened the market to such an extent that its government is now in the process of phasing out incentives, while carmakers in Europe and the US continue to rely on such schemes to boost their sales, which, despite much excitement, remain at a modest ebb.

In the US, tax credits have accelerated the growth of the upmarket BEV scene, a factor that fails to help lower income buyers purchase BEVs, with most manufacturers yet to develop a truly affordable offering. Prioritising environmental action in recent years, European governments have developed a range of incentivisation schemes that include tax exemptions and purchase grants, with variable successes across the continent. For both the US and Europe, it remains to be seen if rolling back these incentives will stimulate manufacturers to take action, or, more likely, witness them falling behind competitors in China.

A senior spokesman for Volkswagen Sustainability Advisory Council, Ye Qi, tells us: “China has been hugely successful in the race for BEV leadership, both growing and evolving model ranges at incredible pace, which is a positive result of a number of factors working in tandem. The urgent need to combat the country’s air pollution problems, the influence of visionary and entrepreneurial leadership (even within a strict state environment), and the country’s significant financial subsidies have all contributed to the impressive adoption rates seen in recent years. Looking ahead, as the climate crisis climbs even higher on the government’s agenda, it is more likely that Western countries will start to push EVs into the mainstream, with the same determination that China has done since 2013.”

Unless carmakers in Europe and the US find avenues, by which to create more affordable BEV offerings, they run the risk of losing their home market advantage to Chinese rivals. As the popularity of the SUV and crossover class of cars has continued to grow in Western markets, the segment looks set to be an important battleground for manufacturers hopeful of establishing themselves as leaders within the BEV market. In the short term, at least, government subsidies and incentives will continue to support BEV sales, but for how long remains a crucial question for the industry, let alone one of conscience for the consumer.

David Krajicek, CEO at JATO Dynamics, tells us: “Governments and manufacturers have made significant progress over the past decade in expanding the EV market, however, the industry remains under pressure, as it continues to adapt to the requirements of sustainability targets and shifting market forces. The incentivisation of BEVs has supported Western manufacturers seeking to expand their offerings, as consumer demand has evolved, however, the industry’s key players must start to address the price gap between BEVs and ICE cars, if they are to remain competitive with their peers in China.

Conclusion:         Affordability is one of the biggest issues confronting us at present, as we emerge through pandemic to confront higher future tax takes. In Part 2 of this series, we shall contemplate the complex overhead costs of BEVs.