The End of the World vs. the End of the Month: How Can You Kill Two Birds with One Stone?

When it comes to automobiles, the future is electric. The European Union has made this official by banning the sale of internal combustion engine vehicles by 2035 (with a few exceptions). However, The promise of making electric vehicles more accessible—with prices falling thanks to economies of scale—is struggling to materialize.

Why?

First of all, automakers are passing on the costs associated with rising raw material prices, logistics issues stemming from the war in Ukraine, and the end of the semiconductor crisis. There is also the new European Global Safety Regulation II, which requires new safety features.

And above all, there is the strategy of European automakers to focus on the premium segment, by selling fewer vehicles but at higher prices, in order to generate a higher profit margin. ^[1]  Finally, for electric vehicles, there is also: the never-ending race toward self-sufficiency, with battery capacities of 85–100 kWh to achieve a range of 600–700 km and compete with gasoline- and diesel-powered cars, while also increasing the vehicles’ weight and carbon footprint. ^[2]

In this context, the price of electric vehicles is holding steady or even rising, while inflation is eroding purchasing power. ^[3]  The dilemma is now a classic one: The ecological transition affects everyone, but it remains a privilege reserved for the wealthiest..

What are the solutions?

One solution is to request more substantial subsidies, such as an increase in the eco-bonus (thereby spreading the rising cost across taxpayers). However, these measures do not change the reality of the cost of electric cars and are not sustainable in the long run.

Another way to lower prices is simply to build cheaper cars. Smaller cars with limited range although sufficient for 95% of trips, and also more low-tech and with fewer customization options.

A good example is the Dacia Spring (Renault Group), an electric car weighing less than 1 metric ton (970 kg, compared to 1,500 kg for a Zoé), with a 27-kWh battery (3 to 4 times smaller than those in the latest models unveiled at the Munich Motor Show), and relatively few onboard features. It is the only European model offered at €20,000 for the base trim.^[4]

And it also has environmental benefits:

• The battery accounts for about half of an electric vehicle’s manufacturing footprint and ~35% of the total carbon footprint in France, so a reasonable size helps reduce the carbon footprint.
• A lighter, low-tech vehicle uses less energy.

The economic benefit is thus combined with the environmental benefit, which is crucial. Because While electric powertrains themselves reduce carbon emissions, that is not enough. We need to focus on fewer, smaller cars with smaller batteries., to limit the carbon footprint and, above all, the demand for metals such as lithium, copper, and nickel.

And on top of that, there’s geopolitical independence! Because While European automakers are struggling to produce small cars priced under €25,000, Chinese automakers could fill this niche, as they have already made inroads in their domestic market, where 30% of cars cost less than 20,000 €. ^[4]  In fact, the European Union launched an investigation last month into subsidies for Chinese electric cars ^[5] , though it is not yet clear what the consequences will be.

The new environmental rating system, set to take effect in 2024, is expected to make eligibility for the French eco-bonus for the purchase of an electric vehicle contingent on the vehicle’s manufacturing emissions performance, which would exclude vehicles produced in China. In fact, the Dacia Spring, which is produced in China, is no longer expected to qualify for the bonus. ^[6]  But even without the eco-bonus, city cars manufactured in China could provide a solution to the challenge of the transition to electric vehicles for people with limited purchasing power—something we’ve already discussed in one of our previous article…by taking market share away from European automakers.

Conclusion

So, are we necessarily faced with the dilemma of “making ends meet” versus “the end of the world”? Yes, if we keep dangling the prospect of massive electric vehicles with a range close to that of internal-combustion vehicles—and which, naturally, are prohibitively expensive for most households. Not to mention that this isn’t sustainable from the perspective of metal extraction. However, It is possible to balance the two by focusing on smaller models by meeting most mobility needs (and combining with other modes of transportation for long trips), while generating a reasonable profit margin, according to a recent study by the NGO Transport & Environment ^[7] . Given that if Europeans don't do it, Chinese manufacturers will take their place. Citroën, however, offers a glimmer of hope with its new electric C3 Manufactured in Slovakia for €23,300 (excluding the eco-bonus).

Finally, by freezing the carbon tax since mid-2018, and by calling for a cap on gasoline prices (prices capped at €1.99 at one-third of French gas stations (Total) through the end of 2024 or sold at cost in supermarkets ^[8] ), The government is not making a stronger economic case for switching to electric vehicles. It’s understandable that the increase should be gradual, but it must still be an increase in order to provide political clarity. Otherwise, it’s difficult to step out of the comfort zone of the “Swiss Army knife” of a gas-powered car.