Electric Vehicles (EVs) now make up nearly a third of the Chinese auto market. But what has allowed China to penetrate its domestic market with EVs more successfully than Europe and the United States? And what are the main implications for the European market?
Electric Vehicle Penetration in the Domestic Auto Market
Source: Neuberger Berman estimates based on Barclays analysis. Data as of September, 2024.
- China electrification in cars is progressing fast, with a further acceleration in 2024 with a penetration rate approaching 30%, as Chinese carmakers are most competitive providers of electric cars on cost and content and in China the price parity between ICE and EVs has been already achieved, hence affordability of electric cars is not an issue in China, translating into consumer preferences quickly migrating in favour of electric vehicles.
- Penetration of electric cars has diminished in Europe since early 2024, to coincide with cuts of fiscal incentives in big car markets like Germany since the start of the year. Electric cars in Europe are still much more expensive than ICE equivalents, raising affordability issues, and on top range anxiety and insufficient charging networks are further hurdles preventing the take off of electric vehicles mass market in the region.
- In the US penetration of electric vehicles has been slower, with penetration still well below 10%, given similar issues highlighted for Europe (affordability, range anxiety, lack of strong charging infrastructure) and less stringent regulatory requirements in US vs Europe, hence carmakers are less pressurised by regulators to move to electric compared to their European competitors.
- To catch up with China, European and US carmakers need to step up efforts to make their electric cars more affordable, while regulatory framework need to be more supportive with industrial policies more effectively supporting the transition.
- Looming stricter fleet emission reduction target imposed by EU authorities for 2025 means that EV penetration needs to rise sharply next year in Europe to meet the regulatory targets, as non-compliance would likely result in big fines for carmakers unable to sufficiently reduce their fleet emissions.
