EV Index 2023 Q1: EV price war? What price war?

In the first quarter of the year, the factors encouraging Electric Vehicle acquisition in Europe have, in general, appeared to stall. Only Italy and Spain recorded a minor increase in their overall EV Index score. The remainder of the Big 5 markets—France, Germany and the UK—saw a reversal. In Germany the upsurge in interest and sales at the end of last year, caused by the imminent reduction in government subsidies, explains the fall during the first quarter as predictable. 

The dip in the UK’s index is due both to a decline in consumer interest and a worsening in the affordability of EVs. Whilst EV registrations in the UK remained strong, rising 19% in the first quarter, their share of the market in fact declined. The increase in registrations across all segments may also be attributed to the clearance of delivery backlogs as supply problems ease. The registration figures may therefore mask current consumer sentiment which, expressed through online interest, does appear subdued.

EV pricing remains the consistent negative across all markets, with the affordability of electric cars relative to fossil fuel models worsening over the course of the quarter. This is perhaps a surprise given how much industry media coverage there has been in recent months of an ‘EV price war’, initiated supposedly by Tesla’s price cutting antics at the beginning of the year. The data, however, tells a different story. You can see in the graph how the prices of the two baskets of vehicles that we track changed between the final quarter of last year and the first of 2023. In all of the seven markets we analysed, the price of EVs has actually increased, by an average of 9%, whilst the price of the most popular ICE vehicles has fallen by 6%.  (We collect pricing data in each market for a basket of the top ten best-selling EV models and a separate basket of the ten best-selling ICE vehicles. We then look at how the differential in average pricing between the two sets of vehicles is evolving.)

Supply chain improvements almost certainly help explain these moves. The European market share of petrol and diesel vehicles has been falling over the last eighteen months and, as the availability of vehicles of these fuel types has been restored, the price they can command has weakened. Growing demand for EVs however means that this segment remains a seller’s market and EV manufacturers are, for the moment, able to sustain higher pricing. 

We will be examining the pricing data for the next quarter very closely to see if it does reveal any softening of EV pricing or evidence of tactical discounting and other ‘price war’ activity amongst EV brands. For the moment it looks like Tesla may have shot itself in both feet: by cutting prices that were sustainable and thereby hitting its own margins, but at the same time, undermining the resale value of its cars so that both private and fleet customers find that the total cost of ownership has increased for their supposedly ‘cheaper’ Tesla. 

The final component used to calculate the EV Index is an assessment of the capability of the public charger network in each market to match the demand of the electric vehicle fleet. Here again there is some divergence between the dominant narrative, that the network is inadequate, and the reality, which is that in only two markets, Italy and Spain are there severe shortcomings, whilst in three markets, France, Norway and The Netherlands there is actually more convenient accessibility for an  EV driver to public charging facilities than an ICE driver has to a conventional fuelling station. 

Here is a table summarising our calculation of the EV Index 2023 Q1 for each of the seven markets we analyse, showing the contribution of each pillar to the overall scores. The figures in brackets show change over the previous quarter.

From this issue of the EV Index The Netherlands is added to the list of markets we analyse to understand the balance of forces shaping the adoption of electric cars in Europe. Although a small car market in terms of overall size, The Netherlands is becoming increasingly significant due to a combination of circumstances, some of which are examined in this short country profile. 

The Dutch car market is the eighth largest in Europe with 312,129 passenger cars registered in 2022. Around 70,700 of these were pure Battery Electric Vehicles (BEVs) giving them a 23% share of the Dutch passenger car market, the highest share in Europe outside of Norway. (In the EU as a whole, just 12% of cars registered in 2022 were BEVs.) By the end of last year there were over 515,000 BEVs in use on Dutch roads. 

There are a number of factors driving and enabling this enthusiastic take-up of electric cars. GDP per head in The Netherlands makes it the sixth richest country in Europe, ahead of Germany and the other Big 5 markets. EVs, which tend to be more expensive than ICE cars, are therefore accessible to a relatively larger section of the population than in other markets.

The Dutch government proactively encourages the transition to electric cars with a subsidy scheme. In 2023, EV buyers in the Netherlands can apply for a €2,950 subsidy to purchase or lease a new EV, or a €2,000 subsidy to purchase or lease a used EV. However, the amount available takes the form of a fixed ‘pot’. In 2023 around €100m has been set aside to assist EV purchase; last year the similarly sized fund was exhausted by mid-June.

The Dutch government is committed to a complete ban on new Petrol and Diesel cars by 2030—five years earlier than the remainder of the EU. The purchase of an ICE car is therefore becoming progressively less attractive as a question mark hangs over its future resale value.

This unflinching drive to carbon neutrality is understandable in a country that is existentially threatened by rising sea levels that result from climate change. But the move to sustainable energy and transport is also driven by pragmatism. The Netherlands’ gas reserves are running out so it has little choice but to move to sustainable energy generation and transport modes or risk dependency on external supplies of fossil fuels.

Where The Netherlands scores most highly in its transition to electric cars is in having the best public charging network of any European country. Research carried out by ACEA—the European vehicle manufacturers association—showed that in mid-2022 the country had over 90,000 public charging points amounting to 29% of the European total despite having a land area equivalent to just 0.8% of the continent’s total. (However, it should also be noted that the typical high density layout of Dutch cities means that relatively few homes have off-street parking allowing the installation of home chargers which therefore increases the reliance on the public charger network for many Dutch citizens.) The relatively small size of the country and the high density of chargers means that range anxiety is a less significant psychological barrier to EV acquisition.

The rapid growth of the EV market in the Netherlands has seen it, along with the Scandinavian countries, become a significant market for EV manufacturers and a favoured launch pad for new model and brand introductions. In April, Zeekr, an all-electric brand of the Geely Holding group, announced it had chosen Amsterdam for its European Headquarters. 

In 2022 Kia, Volkswagen, Peugeot, Audi, and BMW were the EV leaders in the Dutch market; so far in 2023 Tesla has pulled ahead thanks to the popularity of its  Model Y which is now arriving from its Berlin-Brandenburg Gigafactory in consistent numbers. (Tesla may rightly be thinking that, despite the criticism of its recent price reduction strategy this may already be showing its effectiveness in winning market share.)

The EV Index from Sophus3 provides an objective measure of the readiness of the vehicle market to enable and encourage the mainstream adoption of electric vehicles (EVs).

The index is formed from three pillars, each measuring distinct factors that help or hinder electric vehicle acquisition. First of these is the consumer appetite to buy electric, the second is the capability of the automotive companies to supply these cars, and the third is the availability of suitable charging infrastructure.

A score of 100 represents parity in the attractiveness, availability, pricing and usability of an electric car compared with a conventionally fuelled vehicle.

We publish the EV Index for the UK, Germany, France, Italy, Spain and Norway.

A fuller explanation of the EV Index from Sophus3, and links to previous issues, can be found here.