- One expert says 2023 was a “perfect storm” for electric cars.
- EV prices remain high, limiting further growth.
- Chinese automakers have found a way to make a profit while selling cheaper cars to more people.
Last year saw a dramatic shift for automakers, beginning the transition to electric vehicles.
After several years of growth, demand slowed as new competition entered the market, and waves of early adopters were replaced by more price-sensitive customers.
This has led to some soul-searching among manufacturers, and some have cut back on their manufacturing plans accordingly. High interest rates and high bills didn’t help.
Nikolaus Lang, senior partner and mobility industry expert at Boston Consulting Group, said this was a “perfect storm” for the industry on a macroeconomic level.
“Now we need to take the next step towards more volume segments,” he told Business Insider Wednesday at the World Economic Forum in Davos, Switzerland. “We can’t make $70,000, $80,000 EVs. We need to get EVs down to $30,000 or less. I think that’s something the industry is still working on.”
According to Kelley Blue Book, the average price of a new EV has dropped significantly from more than $64,000 a year ago to $50,789 by December 2023. However, CarGurus analysis found that EV prices are still about 28% higher than the average gasoline car price.
Lang said that helped bring a “new realism about alternative powertrains.” Hybrids are popular as a cheaper, emissions-conscious option without the typical EV concerns such as range anxiety and recharging.
What America Still Doesn’t Understand
While American automakers continue to churn out big, heavy EVs that sell at high prices to some niches in the market, Chinese automakers like BYD are producing mass-market vehicles at a fraction of the cost. .
Lang explained three reasons why China is succeeding while its competitors are struggling.
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scale
“Chinese original equipment manufacturers are already benefiting from a large domestic market,” he said. “So they react very quickly in terms of scale, which other OEMs don’t have yet because the European and US markets are limited,” he said. (OEM, or original equipment manufacturer, is the industry term for an automobile manufacturer).
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battery technology
“China has always been at the forefront when it comes to battery technology, which is helping these companies that are closely related to battery production,” he said.
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regulation
“Chinese original equipment manufacturers have also benefited from a regulatory environment with government incentives, which has allowed them to be bolder in their business operations earlier,” he said.
“Chinese EV players are here to stay,” he continued.
Chinese automakers have begun exporting their low-cost models to Latin America and parts of Europe. Lang said the company may eventually try to enter the U.S. market, but that may not be easy given domestic competition and domestic buying incentives.