13 fév 24

How the affordable EV is running two races

Automakers are spurred to market more affordable EVs to reach broader adoption in fleets and secure their sales volumes in low-income and established markets. While the challenge is daunting in Western countries, emerging economies try to deploy them as a starting point to leverage the electric transition.

Small, affordable EVs carry a big promise. They guarantee long-term competitiveness for automotive OEMs, offer sustainability solutions for fleet managers coping with starter-grade employer profiles and function as drivers for zero-emission mobility in developing countries. This is the background:

  • The cost of electric company cars is rising year over year. For example, a leading company car market like Belgium grew by 10% in 2023 and 25% over five years.
  • In the war for talent, affordable EVs can help companies align decarbonization with luring in younger employees (-25y), who now often need to show loyalty first.
  • To battle air pollution, developing countries need to adopt electrification, but the high cost of BEVs is a deterrent.

China is the dominant force in affordable EVs. According to data from JATO Dynamics, the prices of EVs in the US and Europe have increased by 12.5% and 17%, respectively, over the last seven years, while in China, they have been reduced by 50% over the same period.

Downsizing and cheap chemistry

China can cut these costs through local production, government incentives, access to cheap batteries and customer preference. City-dwellers have embraced the tiny Wuling Hong Guang Mini EV (2022: 40,000 units), with an eye-watering price of approximately $4,000. In India, MG Motors markets the similar boxy two-seater MG Comet EV ($9,700) but faces a less successful social acceptance.

Gaining experience in these regions, Citroën is the first to align the affordable concept with its fleet-friendly, more tentative ë-C3, built in Slovakia and priced at roughly $25,000 (€23,000) in Europe, upping the stakes from where China made Dacia Spring broke the mould. Brands with higher resale values, like Volkswagen (ID.2) and Tesla (Model 2), aim for a pricing cap of 25,000 euros but point to the hurdles of inflation and rising material costs. The best practice for doing the magic work is cheaper battery chemistries in downsized packages, as the pack accounts for 10-25% of the total vehicle cost.

Betting on a base version with a 44kWh LFP battery (lithium-phosphate-iron), the price of the Citroën ë-C3 will further sink to $16,444 (€15,000), while Renault promises a $21,800 (€20,000) Twingo with this technology. Also, sodium-ion batteries, though not suited for bigger vehicles, are making strides in the BEV price war - especially in China. Fleet managers must reckon with diminished ranges through lower energy density and slower charging. When affordable BEVs ripen in the A- and B-segments, they could hit approximately a quarter of the market.

Image Source: Wuling

Authored by: Piet Andries