EV price war: China winning, Europe and US losing

Since 2015, your average electric vehicle (EV) has gotten a lot more expensive in Europe and the US. In China, however, EV prices have gone down by about half. As a result, Chinese brands look set to conquer Western markets, JATO Dynamics warns. 

In their latest report, on ‘Affordable EVs and Mass Adoption: The Industry Challenge’, automotive research specialists JATO Dynamics explore the EV pricing imbalance between global regions, and its effect on production and sale in leading markets. 

Price divergence

The most salient fact in the report is the divergence in EV prices between Europe and the US on the one hand, and China on the other.  

Europe

• In 2015, the average EV in Europe cost just under €49,000. 
• In H1 2022, that price had gone up to almost €56,000, a 14% increase.
• As a result, an EV in Europe is 27% more expensive than a petrol car.

United States

• In 2015, the average EV in the US cost just over €53,000. 
• In H1 2022, that price had gone up to almost €64,000, a 20% increase.
• As a result, an EV in the US is 43% more expensive than a petrol car.

China

• In 2015, the average EV in China cost almost €67,000. 
• In H1 2022, that price had gone down to less than €32,000, a reduction by 52%.
• As a result, an EV in China is now 33% cheaper than a petrol car.

Production focus

The divergence between China on the one hand and Europe and the US on the other is so striking, JATO says, because of a different production focus. 

• In Europe, OEMs focus on electrifying premium models and segments, which keeps average EV prices high.  
• In the US, consumer preference for large trucks and SUVs presents a similar obstacle to cost-efficient electrification. Most North American OEMs lag behind their Chinese and European counterparts when it comes to electrification. Tesla is the exception that proves the rule.
• In China, however, the government is actively pushing the democratization of EVs, with pricing used as an important lever. 

The price differential within China (with EVs now significantly cheaper than petrol cars) is providing a major boost to EV sales in China. But the price differential with US- and European-produced EVs is presenting Chinese OEMs with an additional opportunity: to serve the needs of North American and European customers looking to combine affordability with sustainability. 

Not just China

At present, Chinese OEMs are actively broadening their model ranges and refining their models specifically to align with European tastes. In 2021, German OEMs accounted for 21% of all new EV registrations in Europe, but Chinese ones came in second with a market share of 19%. Given the considerable efforts by companies like NIO (pictured) and Polestar, that share looks set to increase over the next few years, JATO says. 

However, China is not the only new market entrant to watch. JATO’s report points to India in particular, noting that the Indian government is strongly supportive of EV production. In H1, as many EVs were sold in India as in the two entire previous years together (admittedly, that figure still only amounted to just under 20,000). 

Mass adoption

“A significant portion of the global population is still excluded from the EV transition due to affordability,” says David Kraijcek, CEO at JATO Dynamics. “Without mass adoption of EVs, emission reduction targets will be unattainable – which represents a real and serious threat for us all. “

The report points the finger at Europe and the US, two markets that have as yet failed to bring down prices of EVs to satisfy demands for car buyers on middle and lower incomes. 

Prioritising profit over market share may eventually cost European and US manufacturers dearly, as OEMs from China, India and other emerging countries produce cheaper models that could capture a large part of global markets, also in the mature markets of Europe and North America. 

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