The Rise of Affordable Electric Vehicles in Europe

Electric vehicle (EV) manufacturers in Europe are expanding their offerings to cater to a wider range of consumers, according to a recent report by Strategy&. Traditionally, these manufacturers focused primarily on luxury and sporty EVs. However, the market landscape is shifting, with original equipment manufacturers (OEMs) now aiming to provide more affordable, entry-level EVs to attract the mainstream consumer.
Volkswagen (VW) is leading the charge by introducing the VW ID.2, set to hit the market in 2025 with a price tag of around €25,000. This model is expected to undercut existing affordable EVs like the Renault Zoe and Fiat 500 Electric. VW is also planning to launch an even more budget-friendly model, the ID.1, which will be the smallest vehicle in their EV lineup and is projected to become available by 2026.

Renault is also revamping its best-selling 5 supermini into a low-cost EV variant, aptly named the new Renault 5. While the price has yet to be confirmed, it is expected to remain under €25,000, further adding to the growing pool of affordable EV options for consumers.

Furthermore, Chinese OEMs, known for their expertise in producing small and affordable cars, are eyeing the budget segment in the European market. This upcoming competition between established European brands and new Chinese entrants is expected to intensify in the near future.

In order to make EVs more accessible to the mainstream consumer, OEMs recognize the need to reduce battery costs. Currently, batteries can account for up to half of the total EV cost. Addressing this challenge, OEMs are exploring recycling solutions to decrease costs and tackle the limited availability of raw materials. BMW, for instance, is collaborating with partners to implement a recycling policy for raw materials extracted from cars and other products.

To support battery recycling initiatives, companies like CATL and Mercedes-Benz are establishing new facilities. CATL plans to build a battery recycling and materials processing center in China’s Guangdong province, focusing on recovering valuable minerals from end-of-life batteries. Mercedes-Benz, on the other hand, has begun constructing a battery recycling factory in Southern Germany.

Governments, with a focus on environmental sustainability, are actively encouraging these developments. Redwood Materials, a battery recycling startup, has secured a conditional US$2 billion loan from the US Department of Energy to construct a US$3.5 billion battery recycling complex in Nevada.

Amidst these advancements, battery innovation remains a constant driving force within the EV industry. The Strategy& research highlights a 20% compound annual growth rate (CAGR) in battery-related patent filings over the last two decades. Asian players, such as CATL, are at the forefront of battery innovation, with their European and US counterparts currently lagging behind.

Source: Electric Vehicle Sales Review Q1 2023 | Strategy&

Source: Electric Vehicle Sales Review Q1 2023 | Strategy&
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