Only 17% of electric cars sold in Europe are compact B-segment vehicles, which are cheaper, compared to 37% of new combustion engines. Automakers are slowing adoption of electric vehicles by prioritizing sales of larger, more expensive electric cars, according to the environmental organization Transport & Environment (T&E).
According to its data, only 40 all-electric models were launched in the compact segments (A and B) between 2018 and 2023, compared to 66 large and luxury models (D and E), according to the report.
This means that one in four (25%) electric vehicles sold in Europe in 2024 will be manufactured in China, according to a new analysis by the European Federation for Transport and the Environment.
Almost a fifth (19.5%) of electric vehicles sold in Europe last year came from the Asian country and this figure is on track to reach 25% this year.
This forecast comes as the European Union is considering imposing import tariffs to counter subsidies to China's electric vehicle industry.
According to T&E, increasing production of electric cars for the global market and investing in the European battery supply chain is the only way for EU carmakers to compete with Chinese brands, but tariffs would also help localize the manufacturing of electric vehicles.
While Chinese imports to Europe have mostly been of Tesla, Dacia and BMW vehicles produced on the continent, T&E projects that Chinese brands could reach 11% of the European electric vehicle market in 2024 and 20% in 2027.
The conservative projection assumes linear growth in market share for Chinese OEMs over the past two years, although BYD only aims to capture 5% of the European electric car market by 2025.
Additionally, increasing the EU tariff on all vehicle imports from China to 25% would make midsize sedans and SUVs more expensive than their European equivalents. T&E also expects compact SUVs and larger cars imported from China to remain slightly cheaper under such a tariff.
However, T&E points out that the EU should not try to protect its car manufacturers from more significant competition, as it would limit the supply of affordable electric cars for Europeans.
“It is crucial that a higher tariff is accompanied by a regulatory push to increase electric vehicle production, including electrification targets for company vehicle fleets by 2030, in addition to the agreed target of 100% clean cars by 2035,” explains the organization.
Investment in batteries, at risk
However, the organization also details that investments in lithium ion batteries are also at risk, since cells manufactured in China are at least 20% cheaper than in Europe, and Chinese battery manufacturers are at the forefront in technology and supply chains.
The United States, for its part, is also attracting investment in batteries through generous subsidies. T&E indicates that industry-level measures, such as subsidies for clean and circular manufacturing and 'Made in Europe' targets, are needed to create an incentive for local cell production.
Therefore, since none of these measures are currently in force, T&E notes that tariffs on battery cells should be considered. Compared to the United States and China, the EU currently has the lowest tariffs on battery cells.
“Tariffs will force automakers to localize electric vehicle production in Europe, and that's a good thing because we want these jobs and skills. But tariffs won't protect traditional automakers for long. Chinese companies will build factories in Europe and, when that happens, our automotive industry will have to be ready,” says T&E senior director of vehicle supply chains and electric mobility, Julia Poliscanova.
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