Carmakers may reduce electric car production as motorists face cost of living crisis
Citroen CEO tells Driving.co.uk the answer long term is price parity with petrol
Car-makers in Britain and Europe are scaling back production of electric vehicles amid falling consumer demand due to the ongoing cost-of-living crisis — that’s according to one British industry body.
In its latest quarterly review, the Advanced Propulsion Centre, the government-funded research group tasked with helping to finance zero-emissions vehicle technology projects in the UK, forecast that British factories would produce 280,000 electric cars and vans in 2025, a significant revision of its previous estimate of 360,000.
“An uncertain economy is expected to drive buyers towards cheaper models and reduced BEV [battery-electric vehicle] production is planned on that expectation,” it said.
“Buyers are expected to stick with cheaper options for longer. Although BEV production is reduced, overall production is increased, with more plug-in hybrids and hybrid vehicles.”
The same trend would also likely be seen across Europe, it predicted, with its forecast for EV production on the continent revised downward by one million units to 12 million, chiefly as a result of the rising cost of living, inflation and the vehicles’ affordability.
Electric vehicles remain considerably more expensive to buy than their petrol or diesel counterparts, largely due to the cost of manufacturing their batteries. Several industry sources have predicted that EVs will not reach price parity with combustion-powered vehicles until the latter half of the decade.
Citroën CEO Vincent Cobée told Driving.co.uk that his company had no plans to scale back production because the market for electric vehicles is highly reactive to prevailing markets conditions, yet the long-term trend is clear.
“Some time last year the price of gasoline in France moved past two Euros per litre,” he said. “The minute that happened, the sales of Ami [Citroen’s low cost electric city EV] doubled. There’s absolutely zero rational correlation between the number ‘two’ and the appetite for an Ami. It’s just that that barrier was too much, and many people said, ‘Okay, I’m done, I’m going to buy something which is affordable and electric, and we’re going to move away from these gasoline prices.’
“And then in November, the government started saying we might get power cuts during the winter because of lack of gas supply and reduced production capability. The minute the government said that traffic in the showrooms for electric cars completely stopped. Again, there’s zero logical correlation, because when you buy a car, you do it for several years.”
Cobée said that in the long term there was no debate that the car industry will move towards electric cars, so the key to reducing market volatility is to reduce production costs and thereby bring about price parity will combustion cars. Part of that is to make cars that don’t have huge batteries, but have “right-sized” ones, which means reduced weight and therefore improved efficiency.
With a focus on these areas, he added, the aim for Citroen is to introduce an affordable electric car for cities.
“I don’t agree that electric cars should be more expensive. So, we will try to make an acceptable competitive electric car for the city which is below 25,000 Euros. Something you can drive your family around in with enough range, and a good enough charging speed, and by the way looking great.
“If you do this, then that cost concern for buyers does not exist.”
The latest statement from the Advanced Propulsion Centre comes as the exponential growth rate of those sales appears to have slowed — despite record EV sales figures including a December where electric vehicles outsold petrol models.
This perhaps adds further credence to the idea that the exponential number of EV sales in recent months may be as a result of supply chains unknotting themselves following two years of strangulation due to a combination of factors, chiefly the global semiconductor shortage but also recently-eased Covid-19 lockdowns in China.
“Battery EVs accounted for just 19% of our retailers’ sales leads in November compared with more than a quarter in June,” said Ian Plummer, commercial director of Auto Trader, speaking last month.
It appears that despite high buyer interest and demand early in 2022 in response to both fuel shortages and spiralling fuel costs, that demand has plateaued and, in many cases, tapered off.
Although electric vehicles remain considerably cheaper to run than petrol or diesel-powered cars (especially if charged at home using cheap electric night rates), a number of other factors beyond the high initial purchase price has taken some of the sheen off EVs in recent months.
Rising energy prices have seen the cost of public EV charging rise by an average of 58% since May 2022 while fuel prices have fallen. The average cost of a litre of petrol is currently just under £1.50 per litre — down from almost £2 in June of last year.
Recent queues at EV charging stations have also underscored the fact that the UK’s public charging infrastructure isn’t yet sufficiently reliable to meet widespread demand for EVs at peak times.
At the end of December 2022, there were 37,261 public electric vehicle charging points across the UK, covering 22,049 charging locations. This represents a 31% increase in the total number of charging devices since December 2021.
However, a 2021 report from the Competition & Markets Authority suggested that the UK needs to reach between 280,000 and 480,000 by the end of the decade in order to meet the extra demand created by the government’s ban on the sale of new petrol and diesel cars.
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