EV transition loses momentum amid lack of affordable models

While automakers and suppliers are betting big on future demand for electric vehicles (EVs), a near-term global slowdown is causing pain in the industry.Europe is stalling for time in the EV race as the region’s automakers struggle with the transition and politicians become wary of fuelling voter frustrations.Volkswagen and Volvo Car AB last week scaled back grand ambitions to challenge Tesla and new Chinese rivals.The reasons: There aren’t enough affordable models to move past early adopters and the wealthy, while reduced government incentives have further sapped customer interest.The result: A plunge in sales.In July, deliveries of battery-powered cars fell more than 10% across the region, mainly due to a 37% plunge in Germany — the region’s biggest market.The strategic shifts risk setting Europe back in the global battle for the future of the auto industry. While the path might be bumpy, there’s broad consensus that personal transport needs to shift away from fossil fuels to stem the worst effects of climate change.The slowdown in EV demand comes as the region’s auto market remains nearly a fifth below pre-pandemic levels, sapping profitability for conventional vehicles as well.Mercedes-Benz Group has also raised concerns over the pace of market developments. After initially pledging to go all-electric by 2030, Mercedes-Benz CEO Ola Kallenius told a shareholder meeting in May that the company will likely offer combustion engine models well into the next decade, noting that the "the transformation might take longer than expected.”European manufacturers have struggled to produce a mass-market EV. High-end models like the €107,000 Porsche Taycan and the €116,000 BMW i7 cater to elite consumers, but inexpensive alternatives remain scarce.Smelling the opportunity, Chinese automakers are capitalising on Europe’s slow transition, putting on sales offensives with competitively priced EVs like the €33,000 BYD Dolphin, compared with a starting price of €37,000 for the VW ID.3.The greater issue is demand in Europe and the US.For the first wave of EVs, carmakers were able to rely on tech enthusiasts and government subsidies for company-car purchases to boost volumes.But for the next phase, they face more cost-conscious drivers, many of whom are sceptical of the technology and balk at buying vehicles that are more expensive than equivalent fuel-burning cars.On average, all-electric vehicles are 30% and 27% pricier in Europe and the US respectively, according to a Bloomberg report.The subsidies and tax breaks that helped drive sales are drying up in Europe, and the current incentives in the US are contingent on a local-production threshold, limiting buyers’ choices.Consumers have also been put off by an increase in borrowing costs as central banks have moved to rein in inflation.Some consumers are still anxious about charging infrastructure and battery range. The rapid evolution of EV batteries can serve as an argument to postpone a purchase until the technology is better.South Korea’s EV sales slipped last year for the first time since 2017 — dipping 0.1% to 157,823 units — according to data from the Korea Automobile Manufacturers Association.Several carmakers, led by Tesla, have cut prices repeatedly over the past year to win customers. Many have also reduced output and staffing to maintain profits.The notion that consumers are indifferent to environmental concerns, or that climate action prevents policymakers from addressing other issues, is deeply misguided, according to Agustin Reyna, Director-General of the European Consumer Organisation (BEUC). With road transportation accounting for about 15% of greenhouse gas emissions, transitioning to cleaner vehicles is a linchpin in national efforts to meet climate-change mitigation targets.A slowing uptake of EVs could also compromise global goals for containing the worst effects of global warming.