With prices high and range-anxiety rife, has the spark gone out of electric vehicles?

With sales in Germany alone down 70 per cent in a year, predictions of the internal combustion engine's imminent demise may have been exaggerated

New Volkswagen ID4 electric cars in Wolfsburg, Germany. Several factors, including range anxiety and high entry prices, are weighing on EV demand in Europe. Bloomberg

The recently acquired Hyundai Kona Electric has taken pride of place in Gary Friend’s home garage in an affluent commuter town, about 30km to the north-west of London.

For Mr Friend, a company director, a large part of his reasoning to switch to electric was financial. “I compared the cost of a battery car to me to the cost of three-year-old petrol car,” he told The National, “I had a solar system fitted [to] provide a very low overnight rate to charge the car.”

Gary Friend calculated a new Hyundai Kona Electric would be cheaper to run than a similar petrol car. Photo: Gary Friend

There are subtle, but important differences, between the three basic types. Plug-ins and hybrids still have internal combustion engines (ICE) that run on petrol or diesel, which are, of course, absent in battery cars.

Battery and raw material prices have slumped so there is no reason for the current EV models on the EU market to be so expensive

Julia Poliscanova,
lobbyist

Global sales of EVs have been increasing steadily for some years, although penetration differs significantly from region to region and, just recently, sales have stalled in certain markets. According to numbers crunched by Bank of America, slightly more than 10 million battery vehicles were sold worldwide in 2023, with 5.7 million in China alone. However, global sales of battery vehicles in the first seven months of this year amounted to only 5.6 million.

In Europe, demand has dipped significantly, illustrated by what the European Automobile Manufacturers’ Association (ACEA) this week called a “spectacular” fall in EV sales. In France, new EV sales fell 33 per cent and in Germany they were 70 per cent lower in August year on year.

The market penetration rate of battery cars in July this year averaged out at 12.1 per cent globally, but there were marked differences within that – China, at 24.7 per cent, had twice the global market penetration and three times that of US penetration, which came in at 8 per cent.

Meanwhile, the Roland Berger EV Charging Index showed that EV market penetration in the GCC was 2 per cent, with the UAE leading the way with 5 per cent. The UAE has a target of having 30 per cent of all new cars on its roads to be EVs by 2030 and for half of all vehicles to EVs by 2050.

Analysts at Roland Berger predicted a “steep rise” in market penetration in Saudi Arabia, where in 2023 only 0.2 per cent of new cars were electric, if it is to reach its goal of having 30 per cent of cars on the roads of Riyadh being fully electric by 2030.

But while Mr Friend has joined the growing ranks of global EV ownership, the industry itself, especially in Europe and the US, has hit several snags.

Home on the range

One issue that has for many years been a restraint on EV sales, particularly fully electric car sales, is range – how far they can drive on a single charge. The fear that an EV will run out of charge before reaching its destination has given rise to a new term: range anxiety.

The average battery car can go for about 400km before needing a recharge, according to Coltura. This can vary a lot, though, such as with the Tesla Model S AWD, which has a range in excess of 640km. Battery technology is advancing all the time and in Januar, Toyota announced plans to build a battery with a range of 1,200km by 2030. In addition, while charging nowadays can take 30-40 minutes, Toyota reckons its new battery will do it in 10 minutes.

Range-anxious electric enthusiasts tend to go for plug-ins or hybrids, whose much smaller batteries are assisted by a petrol engine. But while plug-ins and hybrids assuage range anxiety at the moment, in a few years' time when charging infrastructure is better developed and battery technology has advanced significantly, demand for new hybrid models is expected to drop off.

Tesla charging points in Thurrock, UK. Range anxiety and charging times are still barriers to mass adoption of EVs. Bloomberg

A recent survey of attitudes of UK consumers to battery cars by energy company Ovo found that while drivers appreciate EVs are ‘greener’ than petrol and diesel cars, 38 per cent have concerns that the battery would not have enough charge to reach a destination and more than half (52 per cent) are worried about a perceived lack of charging points.

That survey isn’t alone in highlighting some misconceptions on the part of ICE vehicle drivers, the very people environmental campaigners say need to be enticed into the battery car-owning group.

A new YouGov poll for the Energy and Climate Intelligence Unit (ECIU) found around four in five petrol car drivers (78 per cent) think EV drivers have to use public chargers at least once a week, yet less than one in five EV drivers (18 per cent) report having to do so. The vast majority (82 per cent) of EV drivers say they have never run out of charge.

“When it comes to EV ownership, this polling reveals a huge gap between perception and reality,” said Colin Walker, head of transport at the ECIU.

The price isn’t right

Nonetheless, pricing has been an issue in the take up of EVs. Even though electrical power is cheaper than petrol, in Europe some battery cars, particularly in France, still had higher running costs than equivalent petrol cars.

One reason behind the higher running costs is insurance. While the cost of insuring an EV is coming down, generally it is still more than the cost of insuring a petrol car. In the UK, for example, according to the Association of British Insurers, claims for EVs are 25.5 per cent more expensive than their petrol and diesel counterparts, with repair times 14 per cent longer.

On the face of it, EVs should cost less to maintain than petrol cars, given that they have far fewer moving parts. But charging costs are dependent on location. For example, once a battery car owner has paid £1,000 ($1,330) to install a home charger, they might be able to charge for as little as 7p per kilowatt hour (KWH). But at a BP Pulse charging station, they'd pay between 59p and 83p per KWH, depending on the type of charging point.

Such factors have weighed on demand for EVs in Europe. Recent figures from the Bank of America show a “weak European market” after subsidies fell away late last year and tariffs were introduced on Chinese imports from July this year.

Patrick Hertzke, the co-lead of the McKinsey Centre for Future Mobility, points out the dip in sales is also due timing. “The early adopters already have their electric vehicles,” he told The National, “the next round of buyers are mainstream consumers who are more reluctant to put up with some of the changes in lifestyle related to charging and long-distance travel.”

Bank of America analysts concluded that in Europe battery cars are “still more expensive than petrol vehicles (in some cases 20 per cent higher) and residual losses are higher”, which means the depreciation on a battery car can actually push up total running costs. “In a nutshell, battery electric vehicle prices need to come down in EU (possibly to petrol car price parity) in order to trigger a battery car sales boom regardless of regulation,” the US bank said.

Just owning the car is not the only cost factor. The depreciation on new battery cars can be so much that second-hand car dealers may not even take them as trade-ins, according to research this year by the online vehicle trading platform HonkHonk. Its study of 66 independent UK car dealers conducted in February showed a third were “much less interested” in taking a battery car off a customer’s hands than at the same time last year.

On the other hand, high depreciation rates of EVs, especially battery cars, means prices in the nascent second-hand battery vehicle market may be more competitive than for petrol and diesel cars.

“At the moment, getting an EV second-hand can often be really attractive because you can pick them up very cheaply,” David Bailey, professor at Birmingham University Business School, told The National. “What’s interesting is that as the EVs that came on to the market three or four years ago come through the second-hand market, prices have plummeted. That’s good for second-hand buyers.”

Rules and legislation

But as far as new EV sales are concerned there’s also a legal timetable. For the most part, legislation requires at least 80 per cent of new cars sold in the EU and UK to be electric by 2035, with a scale of ever-increasing percentages in the years approaching that. In fact, the new Labour government in the UK is considering reintroducing the 100 per cent ban on any new car with an ICE being sold by 2030.

The trouble, most of Europe’s car makers contend, is that the targets are arbitrary and ignore current consumer demand. Carlos Tavares, chief executive of Stellantis, said a few years ago that “electrification is a technology chosen by politicians, not by industry”. Indeed, ACEA, which represents the 15 major Europe-based vehicle manufacturers, this week complained the current percentage rules on EV sales are too rigid and cannot adjust to “real-world developments”.

“This raises the daunting prospect of either multibillion-euro fines, which could otherwise be invested in the zero-emission transition, or unnecessary production cuts, job losses and a weakened European supply and value chain at a time when we face fierce competition from other auto-making regions,” the ACEA said.

But Julia Poliscanova, senior director at the European lobby group Transport and Environment (T & E) said if anyone’s to blame for the current crisis of demand in the EV market, it’s the manufacturers themselves.

“What we are currently seeing is not about consumers or economics,” she told The National. “This is about the short-term profit driven nature of western car makers who were too slow to transition to EVs and are now not ready to withstand foreign competition. Battery and raw material prices have slumped so there is no reason for the current EV models on the EU market to be so expensive.”

A BYD Atto 3 electric vehicle. Chinese EVs face heavy US tariffs and could incur penalties from EU legislators from October. Bloomberg

That foreign competition is from China, and it has politicians and car makers worried on both sides of the Atlantic. Only a week ago, the Biden administration set a range of tariff increases on Chinese imports, including a 100 per cent duty on EVs.

Meanwhile, the EU’s 27 member states will hold a vote next week, after which tariffs on some China-made EVs could rise to more than 35 per cent. But many analysts believe that without Chinese BEV imports, the EU will struggle to hit its CO2 reduction targets.

A Renault Zoe in Paris. Public charging points in some European countries cost 10 times more than charging at home. Bloomberg

Infrastructure woes

The annual Electric Vehicle Index published this month said Denmark’s strong support for electrification, including tax exemptions and rebates, had pushed the country into the top rank for EV adoption.

Norway remained what the index referred to as the “global blueprint for EV adoption”, and this week the Norwegian Road Federation announced that for the first time, electric cars outnumbered petrol versions on the country’s roads. Of the 2.8 million private cars registered in Norway, 754,303 are fully electric, against 753,905 that run on petrol, the Federation said.

‘Cheering on the electrochemists’

Even though demand for EVs seems to have stalled lately, especially in Europe, experts predict it will pick up again. The current problems of higher upfront prices, which often make EVs significantly more expensive than their petrol equivalents, backlogs in charging infrastructure development, doubts over range capabilities and various other issues are predicted to fall away within the next 10 years.

“In a sense, this [slowdown in demand] was to be expected because initially EVs were in a premium (price) sector,” Prof Bailey told The National. “As they come into the mainstream sector, then you’re going from niche, early adopters into the mass market, and trying to convince the mass market to go electric is going to be much more difficult, because they [the consumers] are more price sensitive.”

VinFast Auto's manufacturing plant in Vietnam. Battery costs are 10 times lower than 15 years ago, said Patrick Hertzke at McKinsey & Company. Bloomberg

Subsidising consumers to push them to adopt new technology will usually provide a boost to the early stages of a market. The balance comes at the point of mass adoption, though, and some argue that the rug has been pulled from under the car makers too soon. Norway and China had aggressive subsidy regimes for some years and now few consumers in those countries would not consider an EV when purchasing a new car. On the flip side, the dip in European battery car sales is largely down to withdraw of subsidies in Germany. Strip those out and sales growth in Europe would top 10 per cent this year.

Analysts generally agree that the spread of mass EV adoption is about to step up a gear in some markets. Places such as Norway and China are already there, Europe is on the cusp and the US is somewhat further down the road. Plug-ins and hybrid sales will remain strong in some markets, but that will be transitory as EV markets mature and the concerns over range and infrastructure drop away over time and consumers go fully electric.

“From 15 years ago to today, battery costs have reduced by more than 10 times,” Mr Hertzke told The National. “If battery costs and performance improve by just a factor of two over the next 15 years, EVs will be cheaper, longer range and more reliable than petrol vehicles.”