What’s happening with electric cars?

I was once told that in a factory, after changing tool suppliers, the rate of broken drills shortly after use increased dramatically. After many inquiries, discussions with the supplying company, and quality tests, no reason was found for this sudden increase. However, the problem wasn’t in the tool itself, but in the employees who resisted switching brands and sabotaged them.

The electric car has been with us for many years. There have been many prototypes and commercial cars that, during various waves, have tried to convince the public, with varied success, and have faded into obscurity for a while. This also happens with other technologies that never fully catch on and end up being relegated to the drawer until the next opportunity, as happened recently with 3D cinema and television. However, the European Union’s interest in achieving climate neutrality could be the final push for electrification.

Until the announcement of the ban on the sale of internal combustion engine vehicles starting in 2035, the European industry focused its efforts on its money-making machine: the diesel engine, whose vehicles almost monopolised the market in Europe. The EU has consecutively released plans for emissions reduction and improvement of internal combustion engine (ICE) efficiency, from the Euro 1 standard in 1993 to the latest Euro 6, which has been in effect since 2015.

The rise of hybrids and the complexity of the electric transition

In this context, the industry focused on meeting current emissions and safety regulations, which has significantly increased prices, while drastically reducing the pollution caused by vehicles equipped with alternative internal combustion engines (AICE). This phenomenon, which at first glance seems beneficial to the public, has generated a forced cycle of investment in innovation, with strict deadlines to avoid being left out of the market.

Although the current legislation favoured manufacturers by removing low-cost vehicles that didn’t meet the regulations, it also led to spectacular failures, such as the Volkswagen Group’s dieselgate, whose attempt to simulate compliance with strict emissions regulations turned into an international scandal.

Although current diesel engines are considerably more eco-friendly than in past decades, a combination of factors, including dieselgate, the war in Ukraine, and the equalisation of taxes with gasoline, has relegated diesel AICE to a secondary role in new registrations.

In any case, since its approval in 2022, the ban on the sale of AICE vehicles has ceased to be an incentive for the transition and is transforming into the nails in the coffin of this technology. Over time, however, the long-awaited mass-market electric car was still not materialising. Pressure was rising with the regulation of Low Emission Zones in cities, but purely electric vehicles that met the demand expectations and did so at a reasonable price were not available.

Meanwhile, Toyota’s hybrid vehicles continued to increase sales, becoming a temporary solution thanks to the ECO label, which gave them great flexibility to circulate freely in large cities. Faced with this situation, other brands began releasing hybrid models while continuing to work on the future of the electric car. The technological challenges associated with producing mass-market electric vehicles were underestimated, as they turned out to be costly in terms of development and manufacturing, and with difficult access to raw materials such as rare earths.

In contrast to Europe, Japan – and more specifically Toyota – took a very different approach to the diesel engine. Since the 1990s, the Japanese government promoted campaigns to phase out this technology, as at that time it was considered responsible for high pollution levels and severely affecting air quality in major cities.

As a result, Japanese brands focused on designing diesel engines exclusively for the European market. Toyota, however, chose to abandon it and focus on a cleaner alternative: the gasoline-electric hybrid engine, which it launched in 1997. This long-term vision allowed its hybrid engines to remain the best-sellers for years. Relying on this advantage, Toyota did not prioritise the battery electric car and began developing another disruptive technology, namely the hydrogen engine, which the company sees as the true future of motoring.

No one counted on China

Meanwhile, the images coming from major Chinese cities showed streets full of bicycles, where owning a car was a luxury reserved for only a few. However, with the turn of the century, the relocation of manufacturing and the demand that not only factories but also R&D centres had to be located on Chinese soil, the Asian giant began producing some of the most well-known car models globally.

Initially, with the knowledge acquired from vehicle production, they began manufacturing versions of the most popular models of European brands. Since these cars were exclusively for the local market, European companies’ intellectual property protection laws did not apply. Thus, China became a country with significant vehicle manufacturing capacity, and thanks to competitive prices, any Chinese citizen could afford their own car.

With the arrival of the new wave of electrification led by Tesla Motors – a player completely outside the traditional automotive industry – it was proven that it was possible to create a successful electric car without the experience of the major brands, and with good reception from the public. In light of this, the Chinese automotive industry began designing its own electric vehicles. Even technology companies such as Xiaomi have entered the market, offering their own electric car model.

What no one anticipated was the context surrounding this industry. In China, there is no strong tradition of using AICE vehicles, nor are its companies structured like the European giants in the sector. This has allowed the Chinese automotive industry to quickly adapt to the new paradigm and has not generated resistance to change from consumers. Today, China has electrified almost its entire car fleet, and European electric cars have a negligible impact on sales in that country. Even the luxury market, traditionally dominated by European brands, is being conquered by Chinese firms.

In Europe, however, we continue to debate how we will electrify our car fleet. Like the workers in the factory mentioned earlier, in the Old Continent, we are experiencing significant resistance to change, as the AICE vehicle is deeply rooted in Western culture. Furthermore, experiments with electric vehicles promoted as the first electric cars of the new era have generated major disappointments.

Many of these vehicles have not met drivers’ expectations: the durability of the batteries has been poor (some lost nearly all their autonomy in less than five years), customers whose batteries lost autonomy were abandoned by the assistance service, and some vehicles ended up at the scrapyard after a light bump, due to the high cost of replacing the battery module, which was more than the value of the vehicle itself.

But it’s not only tangible issues that displease consumers. It’s enough to recall the criticisms in Formula 1 since the introduction of the hybrid phase, where it was said that the sound of the engines was no longer as attractive as the old V10s. Even today, news is still published about the International Automobile Federation’s attempts to bring back that characteristic and beloved roar for the single seaters.

An uncertain future for the European automotive industry

In this context, the European automotive industry faces a complex challenge. On one hand, its electric vehicles are not competitive against Chinese cars, neither in price nor finish. Consumers turn their backs on them both because of the high cost and because they do not meet their expectations. Moreover, investments in innovation are not being supported by new vehicle sales, and time is running out.

On the other hand, sector sources report that subsidies for purchases are insufficient. The bureaucratic burden, long deadlines, and the uncertainty this generates do not help either. A direct VAT reduction on the purchase of these vehicles could be a more effective solution, according to the same sources.

This situation is compounded by unfair competition from China, with subsidies practically omnipresent in the supply chain, placing the European industry in a delicate position.

However, measures are being taken to give the sector some breathing room. Among them are the new tariffs on Chinese vehicles, the development of synthetic fuels to recycle AICE, and the relaxation of European regulations. Recently, the European Commission announced adjustments to CO2 reduction targets and other protectionist measures due to tense trade relations with both China and the United States. These initiatives have been welcomed with hope in the sector. Will Europe manage to save its automotive industry?