The electric car could run out of power in 2023

The electric car could run out of power in 2023 – what are the reasons for the impending end of the current boom?

The e-car is facing major challenges. The advantage in operating costs compared to internal combustion engines is falling, and the high premium in the sales price continues to increase. How will buyers react?

In Europe’s number one car country, electrified vehicles have really caught up with cars with gasoline and diesel engines in recent quarters. High government subsidies through the so-called environmental bonus drove sales in Germany. According to the Federal Motor Transport Authority (KBA), sales of purely electric cars rose by 83 percent in 2021 and those of hybrid vehicles by 43 percent. This gave them a considerable market share in sales of just under 14 and almost 29 percent respectively. The trend toward electric cars continued in the first half of this year, although the momentum has slowed considerably and customers now view hybrid vehicles much more critically. Next year, however, the e-car boom threatens to come to an abrupt end.

First price increases

The industry is heading for a major crisis consisting of massively rising electricity prices, significantly declining subsidies and list prices that are rising more sharply than those for internal combustion vehicles. So far, the skyrocketing electricity prices caused by Russia’s invasion of Ukraine have hardly reached consumers. This applies both to electricity at home and to that at charging points for e-cars. Some charging point operators have already raised prices or announced rate adjustments, but others are still holding back.

The latter applies, for example, to the provider Allego, which operates around 28,000 charging stations across Europe. The company has already increased prices by around 7 to 10 percent to 47 to 75 cents/kilowatt hour (Ct./kWh) as of September 1, depending on the tariff. In the market as a whole, however, the jungle of rates for normal, fast or very fast charging seems even more confusing than in mobile communications. At present, rates vary from around 35 to 80 Ct/kWh. At the home wallbox, where more than 70 percent of charging takes place, it is generally cheaper.

The experts from the Duisburg-based Center Automotive Research (CAR) calculate in various scenarios that an increase in electricity prices from 32 to 50 Ct./kWh would result in additional monthly costs for a medium-sized electric car of 38 euros (or 6.3 percent); an increase to 75 Ct./kWh would even result in additional costs per month of 90 euros (or 15 percent). This would make small and medium-sized electric cars in particular much less attractive, says Ferdinand Dudenhöffer, director of the CAR Institute, in an interview. For large electric vehicles, on the other hand, the price jump plays a lesser role. Those owners of an electric car who have their own photovoltaic system, for example on the roof of their home, can also be happy.

Hildegard Müller, President of the German Association of the Automotive Industry (VDA), had already called for more international energy cooperation from the German government in an interview with the news channel “Welt” at the end of August, so that power shortages and high electricity costs would not slow down e-mobility in Germany.

Eliminating subsidies

However, rising electricity prices are not the only reason why electric cars are becoming less attractive than combustion engines. Demand for the “Stromern” could be significantly dampened in 2023 by the decline in subsidies granted.

In 2022, buyers of e-cars and hybrids could achieve a total subsidy of up to 9000 euros; from 2023, the new maximum will be 6750 euros. Previously, the subsidy consisted of the environmental bonus offered by the federal government and a manufacturer’s share of 3000 euros each. In addition, the innovation bonus from the Corona stimulus package doubled the government subsidy to 6000 euros. From 2023, this extra premium for e-cars will now be discontinued. The state subsidy for vehicles with a net list price of up to 40,000 euros will then only be 4500 euros, and for those with a net list price between 40,000 and 65,000 euros it will be 3000 euros. Hybrid vehicles will no longer be subsidized at all.

In addition, the subsidy will be limited to private individuals from September 1, 2023. For the very important group of corporate customers, the purchase of an electric car will then become significantly less attractive. There are also plans to further reduce the subsidy for the following year 2024. In addition, the premium pot made available is capped at 2.5 billion euros. Observers assume that this sum could be reached as early as next fall.

Expensive electric cars

But that’s not all, because the purchase prices of the already very expensive e-cars are likely to rise faster than those of combustion engines. Semiconductor and raw material prices are contributing to this. An electric car needs more than twice as many chips as a combustion engine. Due to disruptions in global supply chains and local one-off events, semiconductors suitable for the auto industry in particular are still a scarce commodity, and there is no end in sight to the chip shortage. In addition, prices for many battery raw materials such as lithium have already risen sharply, and observers expect further cost increases.

Already in the past twelve months, the prices of the 15 most popular electric cars in Germany have risen by an average of 14.5 percent, or almost 5400 euros, according to the CAR Institute, whereas vehicles with a gasoline or diesel engine have only become more expensive by 12.5 percent, or 3500 euros.

Already, electric cars are in some cases much more expensive than their combustion engine counterparts. According to CAR, an electric Fiat 500 costs just under 35,000 euros, while the conventional Fiat 500 model costs only about 17,500 euros. Somewhat less significant, but still substantial, is the gap between the battery-electric Opel Mokka Elegance (42,790 euros) and the regular Mokka Elegance (30,550 euros). On the other hand, a Tesla Model 3 is minimally cheaper compared with a BMW 3 Series sedan (52,500 versus 53,600 euros).

Inverted ratios

The old formula according to which electric cars are more expensive to buy but cheaper to run is changing. In the future, electric cars will probably be even more expensive compared with combustion engines, but at the same time their advantage in terms of operating costs is declining or even disappearing altogether. “From 2023, the electric car will be at a clear disadvantage compared to the combustion engine,” says Ferdinand Dudenhöffer of the CAR Institute, “and that’s under a green economy minister of a traffic light government, of all things.” If the negative trends for the electric car continue, the current sales boom could soon turn out to be a flash in the pan.

Source of the news: https://www.nzz.ch