Cars

While purchase prices for most EV models are currently still higher than comparable diesel and petrol cars, electric cars are expected to reach parity with conventional models in the mid-2020s. The volatility of raw material prices and supply chain constraints could delay this by 1-2 years. However, the total costs of ownership (TCO) is already lower for most EVs when taking into account how much it costs to fuel, maintain and insure the car. Smartly designed taxation is key to make electric cars more affordable, notably bonus-malus tax systems that compensate financial support for zero emission cars with higher taxes on polluting vehicles.

But despite EV production costs reaching parity with combustion engines, carmakers are not delivering entry level models at volume. Instead they have focused on selling larger, more profitable BEVs. While there have been some announcements by European carmakers that cheaper compact models will be coming in 2024-2027 such as the Renault 5 and Volkswagen ID.2, less than 50,000 cars of the announced cheap models are expected to be produced for Europe in 2024 which is unlikely to satisfy demand. This leaves the European compact, mass market wide open to Chinese competition.

The arrival of more affordable, small electric cars would hasten the uptake of zero-emission cars in Europe. A YouGov survey for T&E in 2023 found that one-quarter of new car buyers already intended to buy an electric car in the next year. But when given the option of a small €25,000 electric car, the share of new car buyers willing to buy a battery electric model increases to 35%.

The car industry is experiencing the greatest transition it has ever faced. It is a moment at which European companies must adapt and change to survive - or be overtaken by US, Korean and Chinese competitors. But despite apocalyptic warnings, new jobs in the EV supply chain will make up for the anticipated job losses in the traditional ICE-focussed automotive sector. The challenge is making sure Europe’s workers have the right skills for these new jobs. A Boston Consulting Group analysis found that by 2030, 2.8 million workers will need to be hired and 2.4 million positions will have a changing job profile with different degrees of training needs. Employment numbers will remain constant, it said.

Europe is in a global race to capture the benefits of the new EV value chain and there is a lot to lose in terms of competitiveness and jobs if Europe dithers on electrification now. With EV sales and e-mobility value chains gathering pace in China and the US, Europe should make clear that it will not waterdown its 2035 target to reach 100% zero-emission car sales. The greatest threat to our car industry and jobs is if Europe loses the technology race - becoming dependent on Chinese battery makers and losing global car market share to foreign rivals. Chinese OEMs are already making headway into the EU EV market.

To ensure the transition to e-mobility is fully sustainable and socially responsible, it must be underpinned by a green, ethical and world-leading battery supply chain in Europe. The EU Batteries Regulation, for the first time, sets environmental protections throughout the entire life cycle of batteries – including the sourcing of raw materials, production and recycling. Meanwhile, new EU due diligence rules will address concerns around potential human rights abuses linked to the extraction of battery raw materials. The bloc’s Critical Raw Materials Act will require some of the metals value chain, notably refining, processing and recycling, to be on-shored to Europe. Find out more in the batteries section.