The price of electric vehicles and the range/cost of batteries are the two main barriers currently preventing further adoption of this type of vehicle. However, both obstacles are gradually being overcome. Germany, for example, appears to have pressed the right button to begin addressing the first of these burdens: high costs. While it may seem counterintuitive at first glance, the end of EV subsidies in Germany has caused a wave of price drops that allows for interesting comparisons of some models with other European countries such as Spain.
To the surprise of the media and analysts, The German government announced in mid-December that it was ending. immediately and in advance for a subsidy for the purchase of electric vehicles following the decision of the Constitutional Court (CC), which invalidated the transfer of billions of euros related to the pandemic to the fund for financing the transformation of the economy. “As part of the negotiations on the Climate and Transformation Fund (KTF) on December 13, it was decided to terminate support through the environmental bonus as soon as possible,” the Ministry of Economy and Weather Protection said in a statement. .
The subsidy for which Electric car buyers can save up to 6,000 euros, ended next week. After the end of the subsidies, major brands, faced with the fear of lost sales, ipso facto announced that they would adjust their prices to maintain the final cost of the cars if the subsidy had been maintained. In this way, the German government saves several billion euros incurred by car brands by reducing their profits.
Thus, the German government is not even trying to find a way to significantly reduce the number of electric vehicles. It was surprising: all the major manufacturers immediately went to work and announced discounts similar to the assistance provided by the German government: Audi, Mercedes, Kia, Stellantis… these are some of those who quickly added some kind of promotions to their sites . or their own “aid”, which kept the price at the same level as with government assistance.
Difference between Spain and Germany
Industry analysts explain that electric vehicles made in China are sold within the Asian giant at relatively low prices, but then arrive in Europe at much higher prices. The goal of manufacturers is to achieve high profits that will allow brands to cover the high costs of changing technology. Brands are forced to bet on the electric car after years of investing millions of dollars in improving internal combustion engines and automobiles. All these investments will never be profitable if Brussels’ environmental and emissions plans are met.
However, all indications are that brands can sell electric vehicles at a lower price in Europe. Until now, the most “hated” comparisons have been with China, where electric car models sell for 9,000 euros, while in Europe they cost more than 20,000. But now the end of subsidies in Europe has led to a similar comparison between euro member countries that share tariffs and transportation costs.
For example, Dacia Spring is already 40% cheaper in Germany than in Spain.
. When the subsidy was in effect, the price of this car in both countries was approximately the same. However, after Germany announced at the end of last year that it would end assistance for the purchase of electric vehicles, the Dacia Spring fell in price in the German country by an average of about 10,000 euros. Now this car can be found for about 12,700 euros. However, in Spain the price “from 19,590 euros without MOVES III plan”, this is the price of the most basic car. It would be logical to think that stopping this “help” in Germany would make cars more expensive for German consumers, who would have to face the “real” cost of buying an electric car. However, brands, frightened by a possible drop in sales, responded with massive price cuts.
“As demand weakens and governments force manufacturers to bring more electric vehicles to market, a “relentless” price war is expected in 2024,” Forbes said in a feature article. Latest data from the European Automobile Manufacturers Association (known by its French acronym ACEA) showed that electric vehicle sales fell in December for the first time since April 2020 (down 16.9% to 160,700), forcing deep discounts.
But the story doesn’t end there. Also in Germany is an American electric vehicle company Tesla has cut prices by 5,000 euros on two versions of its Model Y.The Wall Street Journal reports this. The Performance model now costs German consumers €55,990, while the Long Range model costs €49,990. Tesla also reduced the base price of the Model Y by 1,900 euros to 42,990 euros.
Big difference between China and Europe
When compared to China, the difference becomes even more important. It should be taken into account that the “Asian giant” is the king of electric vehicles and its rules are not the same. In China there is even a Baw Yuanbao model that costs less than 4,000 euros. However, Jato shows how prices of electric vehicles in China have shown a downward trend from 2015 to today, while in Europe and the US the price has remained the same or even increased. In China, the average price of electric vehicles for the end consumer is 30,000 euros, while in the USA and Europe it exceeds 60,000 euros.
China not only has the know-how and technology, but also other advantages to produce such low-cost electric vehicles. “China’s advantage over the United States and Europe in producing low-cost electric vehicles is also due to the country’s relatively lower labor costs,” they explain from Jato. China overwhelmingly dominates this market. On the other hand, although electric cars sold in Europe are often made in China, tariffs, transportation, distribution and sales costs, taxes and, above all, profits play a big role.