Europe is losing ground with micro electric vehicles: Chinese are pushing small car prices

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Until now, the rule in the automotive industry has been to make a lot of money with premium vehicles and big cars. As a result, Mercedes is kicking the A-Class out of the program and only wants to make money as a luxury brand in the future. This new strategy seems to be working. In the first quarter of this year, Mercedes-Benz earned the equivalent of about 36.5 billion francs – a massive eight percent increase over the previous year.

But in Germany, Mercedes boss Ola Källenius (53) has received critical acclaim for his newly prescribed luxury course. “I think this strategy is a mistake. If you build cars only for the rich and the super-rich, it will lead to acceptance problems,” says Green Baden-Württemberg Transport Minister Winfried Hermann (70) in an interview with Mercedes CEO “Heilbronner Voice”. The numbers speak a clear language. Between 2019 and 2022, the average price of a Mercedes rose from 51,000 francs to 73,000 francs. Money that is not in everyone’s pocket.

European small electric cars from 25,000 euros

But especially in our increasingly populated metropolitan areas, small, affordable electric cars are more important than huge luxury sleds for private transportation to keep running – the emphasis is on affordable! With the ID.2 to be launched in two years, VW is targeting an entry-level price of under 25,000 euros. This is considered ambitious. The cost driver is the battery. Additionally, VW has to use a promise of value. On the Wolfsburg group’s management floor, you can still feel the verbal smack that ultimately resulted from the savings cuts in the ID.3’s cheap-looking hard plastic interior. In addition to VW, by 2025 only Renault will likely launch another small car electric vehicle with the retro-style electric R5 in a price segment similar to the ID.

So that doesn’t change the fact that small cheap new cars like the Hyundai i10 starting at 13,990 francs today cost almost only half the sales prices targeted by VW or Renault for the new Stromer midgets. Even the cheapest Stromer in Switzerland at the moment – the Dacia Spring – retails for only 19,990 francs. This hefty price gap between the cheapest available gasoline and the current or future cheapest gasoline has, of course, been spotted in China as well. No wonder, given that they are poised to jump on our continent with suitable offers. “Electric small cars under the MG4 Electric also fit very well with our brand in Europe,” says Jan Oehmicke, Vice President of Europe at Chinese manufacturer MG Motors, and they have corresponding ambitions.

China’s small electric vehicles are significantly cheaper

Whether a Chinese attack on Europe with small electric vehicles will be successful will of course depend largely on the price and appearance or quality of the vehicles. Business administration laws also apply in the Middle Kingdom. A few weeks ago at the Shanghai Motor Show, small electric cars were shown that, at first glance, do not need to hide behind a Dacia Spring. What about the prices? Cars such as the BYD Seagull (costing approximately CHF 10,400 equivalent), Wuling Bin Guo EV (from SAIC-GM joint venture, approximately CHF 8,000) or Ora R1 (equivalent to approximately CHF 8,900) were available for some at the time, a real is a challenge. And it stays that way when you add in the import costs and taxes that still have to be paid.

Difficult days are beginning for European manufacturers in the small car market. Especially since Chinese automakers are already used to dealing with high-priced bandages. “In the People’s Republic, the need for initial mobilization has always been greater than in the West. Peter Fintl of Capgemini management consulting firm says no major manufacturer is willing to give up the high-volume segment. The tough conditions in the country have pushed BYD, SAIC & Co. to Europe. «Players there have learned to develop leanly and produce cost-effectively. Of course, low labor costs help. But without optimized production processes and cost-effective technologies and materials, you cannot remain competitive in the long run. Fintl, China He says automakers now have significant expertise in scaling across all segments.

Cheaper new battery technology

Asian automakers are also preparing for a price war on batteries. Chinese battery manufacturer CATL has developed rechargeable batteries based on sodium ion cells for mass production and is already supplying the manufacturer Chery. According to Fintl, these batteries offer great potential. Not only to reduce battery costs by nearly 40 percent from today’s average of $150 per kilowatt hour, but also to significantly reduce reliance on critical raw materials. However, western automakers will of course also benefit from these developments, so it is not just general conditions such as wage costs that are decisive.

But even if wages rise in China, this job factor is significantly lower than, for example, in Germany. That’s why VW wants to build the ID.2 and all its sister models in Spain in order to be at least reasonably competitive in terms of price. Therefore, the fight for market share in the small car segment is likely to be relentless, and we, the consumers, will probably benefit the least. Because the competitive prices of small electric vehicles of the future with a range of around 300 kilometers may soon start at 20,000 francs and under in Europe.

Source: Blick