Some experts predict that electric vehicle demand in Europe will drop as potential EV drivers in the region wait for electric cars to become more affordable. Many European Nation countries have pledged to electrify their vehicle fleets over the next few decades as part of a coordinated effort to curb global warming and climate change.
Electric cars are the supposed successor to internal combustion engine vehicles, but their high prices have them almost unaffordable for the average European driver. The region has seen a surge of cheap electric cars from China in recent months that partly contributed to a 47% increase in battery-electric vehicle sales in Europe through the first nine months of 2023. However, these cheap EV exports were supported by massive subsidies from the Chinese government, leading many EU leaders to claim that the Chinese government was artificially lowering electric vehicle prices and shutting European carmakers out of their local market.
Companies such as Volkswagen, Mercedes-Benz and Tesla that don’t have the government investment needed to offset high EV production costs and still price their EVs at relatively high points fear that increasing interest rates may reduce electric vehicle adoption even further. Data shows that customers are uncertain about EV prices, range and safety.
In Britain, for instance, electric vehicles cost an estimated 33% more than gas-powered alternatives. With interest rates rising across the world, the overall cost of purchasing such vehicles has crept even higher, particularly for people who would typically finance such a purchase with credit.
Consequently, a lot of prospective electric vehicle buyers are keeping their wallets closed while they wait for electric cars to become more affordable. Electric vehicle makers such as Tesla have long spoken about developing an affordable electric car, and the Texas-based carmaker recently announced that it would construct a $25,000 EV at Gigafactory Berlin-Brandenburg.
Additionally, Volkswagen recently announced that it hoped to build a sub-$35,000 electric car in the United States within the next three to four years. Developments on the battery-making side may also lower production costs, increase range in the future and improve EV battery safety, giving customers even more incentive to wait a couple of years before they finally switch to electric cars.
Electric vehicle technology will definitely increase with time, and many consumers do not want to be saddled with an “obsolete” EV model with a low resale value. Car companies such as General Motors and Ford are stepping back from ambitious electrification targets, reducing spending on EVs and delaying the launch of affordable models in response to declining EV demand.
Given that analysts expect buyers to hold out for more affordable EV options, it would greatly help manufacturers such as Fisker Inc. (NYSE: FSR) to expedite their plans to bring such affordable models onto the market sooner rather than later.
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