Since 2010 there has been a significant increase in electrical vehicles demand. Until 2019, in the EU-27, the new registrations share of BEV (Battery Electrical Vehicle) and PHEV (Plug-In Hybrid Electrical Vehicle) was less than 10%, but then it exploded to about 23% in 2023 alone. This marks a shift in consumers’ preferences.   

EV cars have a bright future ahead of them benefitting from the environmental concerns, such as global warming.  Even if EV cars may be more expensive today, they are and will become overall more wallet friendly. For example, less complex engines lead to a 35% reduction in maintenance costs, an average 70% reduction in charging costs compared to fuel ones and buyers can receive various forms of subsidy/incentives. It is also important to note that Europe will ban new registrations of cars with internal combustion engines by 2035.  

But this is not without some turbulence. Currently, we experience another wave of skepticism. But then, why are some investors deserting the EV market, like BBC’s Top Gear mentioned it? What are the threats to the EV market?  

• Interest rates: Rising interest rates induced lower sales volume than expected. Even if there is no clear vision on how those will evolve, the inflation tends to lower and interest rates might follow the same trend.  
• Fast technology development: Battery capacity is increasing, with WLTP (Worldwide Harmonised Light Vehicle Test Procedure) measurement reaching up to 700 km. Charging capacity is also developing rapidly, with cars charging faster and faster, for example some models can drive about 200 km after charging for just 5 minutes. The knock-on effect of this rapid development is that consumers are waiting to buy their car, knowing that another one with greater capacity will soon be on the market. 
• Battery concerns: Despite the fast technological progress, drivers are still afraid that they will run out of battery before reaching their destination, or that charging the car on route will be a struggle. To answer those concerns, car manufacturers are constantly improving battery power, as well as the charging time which is always getting shorter. Countries also want to push EV as part of the energy transition, and therefore are redesigning infrastructures to include more and more charging stations. Moreover, there are some uncertainties about battery lifetime as it depends a lot on the weather condition and the charging habits. As an example, for the same battery it lasted 5 years in Florida against 13 years in Alaska thanks to the colder climate.  
• Lack of education: People still have a lot of misconceptions about EV cars, discouraging them from buying. Based on a study directed by Ford, 90% of interrogated Americans and Europeans, think that EV cars have poor acceleration, when indeed, all EVs have good to impressive acceleration due to the immediate torque. 
• Cost of raw materials and supply: Batteries are currently made of materials such as lithium and cobalt that are expensive and pollutants to extract, and available in limited quantities. As a result, car manufacturers are struggling to offer cheaper car models as their margins are shrinking. Several companies are currently tackling this issue by developing smaller batteries that can store more energy and charge faster, meaning less raw materials are needed.  
• Competition: Traditional manufacturers are being attacked by the market entry of challenger EV cars. Those offer a similar level of quality, for some a better battery for a cheaper price, diverting consumers from western brands. Still, there is time before Asian car grab the majority of market share as they didn’t build a strong brand image on American and European markets. In addition, even though digitalization is globally taking over, many customers still cherish contacts with car dealers, to see, test and discuss cars properties. Therefore, the network is still of paramount importance.  

Hence, it can be said that the arrival of electric vehicles also brought a wave of change to the car market. New players entered the market and disrupted it with their unconventional management style, overshadowing the traditional OEMs. Why are some traditional OEMs getting outmaneuvered by newcomers such as Tesla or BYD?  

When looking at EV market share in the USA, Tesla far exceeded all other manufacturers with 72% in 2021 while traditional OEMs don’t get even close to 10%. Why such a gap? Few reasons shed light on that:  

• Forerunner: Tesla launched the EV train and other carmakers were slow to follow suit. The same brand also launched its e-commerce store in 2019 while it took three more years for most traditional OEMs to do the same. Newcomers are pushing innovation forward and fast.  
• Speed: OEMs have a traditional company structure with a rigid hierarchy, while newcomers are using the Startup model with a flat one resulting in fast decision making and application.  
• Production: OEMs offer many more models and customizations, resulting in complex production lines. Newcomers took the risk of offering cars with a simple design and a minimum of customization which seduced their target group.  
• Risk taking: Newcomers thrive on innovation and risk-taking, while large groups tend to avoid and play it safe.  
• Expertise: For many OEMs not all the knowledge is built in-house, making them dependent on external factors while newcomers prefer to use the opposite strategy. 
• Distribution: OEMs rely mainly on physical dealerships while we are in the digital age. Customers value face-to-face contact with a salesperson, but they also want to have the possibility to use 100% digital solutions for their vehicle order and payment.  

Even if newcomers are ahead of OEMs on the EV market, one must not forget that they still need to put a lot of effort to build their brand image. In addition, some are heavily dependent on OEM funding, such as Polestar with Volvo that was just recently spun out.  

OEMs can also look for solutions to offer flexible, convenient, and a seamless digital experience by using financing solution such as LeaseTeq. They also need to create a full ecosystem, where customers can easily sell/buy/lease used cars. By doing so, they would generate additional revenue while relieving their customers of a burden. 

To put in a nutshell, the EV market may have taken a short-term hit, but many consumers are convinced and determined to use greener solutions which will certainly be reflected in EV sales in the near future. As for new manufacturers, they still have a long way to go before they dominate the European market, giving Western manufacturer time to play their cards right by bringing needed innovation to their products. We believe in a highly diverse automotive future with various drive train technologies and sales models coexisting for a long time.  

Sources:
Le Point – La voiture électrique entre dans la bataille des prix
Beev – Chinese vs. European electric cars
CARSLOTH – The most common problems with electric cars 
BBC – Three big reasons Americans haven’t rapidly adopted EVs 
blink – Fact from Fiction: Why Many Consumers Don’t Buy EVs 
BONPOTE – La voiture électrique, solution idéale pour le climat ? 
mediabask.eus – L’avenir de la voiture électrique s’assombrit 
Soyez au courant – Batterie de voiture électrique: où allons-nous?
clubic – La vitesse de charge record de cette nouvelle nouvelle batterie pourrait faire taire les débats sur la voiture électrique
Fleet News – EV range test: how far can the latest models go?
BBC TopGear – Opinion: investors are getting cold feet over electric cars, and here’s why 
European Environment Agency – New registrations of electric vehicles in Europe 
MOBILITY PORTAL EUROPE – 2023: Foreign automakers dominate EV market share in the EU