The great divergence between China and Europe on electric cars

With China taking off and Europe stagnant, the first half of 2024 marked a growing divergence between the sales trajectory of the electric cars and plug-in hybrids between the two markets.

In Europe, such models accounted for just 20.5% of cars sold in June, down from a year earlier, while in China, electric cars and plug-in hybrids saw strong growth.

In July, its share of the Chinese market surpassed the 50% barrier, compared with 36% the previous year.

“Dominated by the West in combustion cars, the Chinese wanted to be dominant in electric cars. This is evident month by month,” noted economist Bernard Jullien of the University of Bordeaux.

Unlike European manufacturers, many Chinese manufacturers were born with the electric cars.

“For them, the electric car is not a ball that they have to drag around for regulatory reasons,” but “the fruit of an arsenal of measures adopted by the Chinese government”explained Tommaso Pardi, from the French National Centre for Scientific Research (CNRS).

Meanwhile, “Western manufacturers must divide their efforts between their combustion production, which is still profitable, and the development of electric cars, which is not yet profitable,” Pardi added.

Mature market

By 2023, China accounted for 60% of new electric vehicles registered worldwide, according to the International Energy Agency (IEA).

China has created a powerful electric battery industry, following the example of its giant BYD, which supplies Tesla, BMW and Audi.

“Chinese manufacturers’ access to these batteries at prices lower than those of Western manufacturers significantly reduces the cost of the vehicles,” Pardi explained.

This advantage has allowed Chinese manufacturers to enter the market “with cheaper vehicles designed for urban use,” Jullien said.

The IEA estimated in April that 65% of electric vehicles sold in China They were already cheaper than their combustion equivalents.

In contrast, in Europe the price of electric cars remains high, and sales are correlated with subsidies or incentives for purchase.

Germany recorded a 36.8% year-on-year drop in sales of 100% electric models, the sixth consecutive drop since the government ended incentives for their purchase.

In China, generous purchasing subsidies have enabled sales to grow.

The Chinese market now appears to have reached a certain maturity.Demand finds a supply that matches it very well. It is a market that is no longer totally subsidized and artificial, it has become a natural market,” Pardi said.

Customs duties

The European Union, Pardi said, is caught between ecological imperatives, with the upcoming ban on the sale of new internal combustion cars from 2035, and industrial and economic demands, with China ready to export its fleet of vehicles to the EU.

To gain time, Brussels announced in July temporary additional customs duties of up to 38% on imports of Chinese electric cars.

In response, China sued her before the World Trade Organization (WTO).

“That would give some time to European brands, who could occupy the space” left behind by Chinese brands, Jullien said.

He cited an “increasingly comprehensive catalogue of European manufacturers”, for example, with the arrival on the market of new models costing less than 25,000 euros, such as the Renault 5 or the Citroen e-C3.

But to steadily reduce Chinese EV registrations, “it is absolutely necessary to produce smaller and less expensive vehicles,” Jullien said.