One of the key findings of the T&E report highlights the surge in automakers’ profits, even as car prices skyrocketed in the aftermath of the Covid-19 pandemic. T&E’s analysis of six major car manufacturers, including BMW, Mercedes, Renault, Stellantis, Volvo Cars, and Volkswagen, reveals that the revenue per new car increased significantly, ranging from 33% to 52% between 2019 and 2022. Notably, this increase in profits accounted for up to 94% of all revenue generated during the same period.
Another prominent trend observed in the European car market is the proliferation of larger vehicles, particularly SUVs. In 2010, SUVs represented only 9% of new car sales among the analyzed manufacturers. Fast forward to 2022, and that figure ballooned to 47% (and 53% across all car sales). Surprisingly, this shift toward larger vehicles has been most pronounced in the middle (C) segment, traditionally the home of medium-sized hatchbacks and sedans, with a staggering 61% share of SUV sales.
Simultaneously, smaller, more affordable car models that have long characterized the European market are being phased out, a trend attributed by some automakers to EU emission rules and changing consumer preferences. However, T&E’s analysis suggests that this may be part of a strategy to maximize profits, as SUVs tend to be more profitable than non-SUVs, with price premiums ranging from 8% to 30%.
The T&E report also delves into the economics of small battery electric vehicles (BEVs). Surveys conducted in several European countries showed that cost remains a significant barrier to faster BEV adoption. If a €25,000 small BEV were to become available, it could potentially boost the sales share of fully electric cars to 35%, resulting in an additional 1 million electric vehicles sold annually, replacing their combustion engine counterparts.
T&E’s modeling indicates that it is feasible to produce a small segment (B) BEV in Europe by 2025, priced at €25,000 with a reasonable 4% profit margin. This BEV would come equipped with a 40 kWh LFP battery and a range of 250-300 kilometers. Recent developments in EV manufacturing, the supply of critical metals, and price reductions hinted at by major automakers make this scenario increasingly likely.
However, while the technology and market conditions appear favorable, the report underscores that the availability of such affordable small BEVs on the European market is not guaranteed at the necessary speed and volume. To compete with Chinese rivals, who are already offering inexpensive small electric cars in Europe, a coordinated strategy is needed at the European, national, and local levels.
The report calls for measures such as European EV efficiency rules, national vehicle taxes and subsidies that discourage heavier vehicles, and local weight-based parking charges. Such initiatives aim to encourage European automakers to prioritize the production of smaller, more cost-effective EVs over resource-intensive, expensive SUVs.
In conclusion, as Europe navigates its ambitious path towards electrification, the T&E report sheds light on the challenges and opportunities that lie ahead. Achieving affordable electric mobility for a wider pool of consumers is within reach, but it will require a concerted effort from policymakers, manufacturers, and the industry as a whole to make it a reality.
Source: Small and profitable: why affordable electric cars in 2025 are feasible | Transport & Environment
