Small and profitable: Why affordable electric cars in 2025 are feasible

(Transport and Environment, 14 Sep 2023) T&E's study answers the big question hanging over electric car adoption: can EVs produced in Europe be affordable for the masses?

As Europe transitions to electric cars at scale and speed to match its climate ambitions, they need to become accessible to a wide pool of commercial and private drivers that need cars in their daily work and life. Many in the industry are talking about a €25k battery electric car (BEV), before subsidies, as the gold standard for mass affordability. But car prices are determined by many factors, including their size and market segment, the costs of components and materials, as well as the corporate mark-ups and profit margins. In this paper T&E looks at the EU car market in the last few years, car prices and automaker product strategies to answer the following question: is a €25k made-in-Europe BEV possible by 2025?

Higher profits per car despite the supply chain crunch

Anyone trying to purchase a car recently knows that car prices shot up following the Covid-19 pandemic. What is less known is that so have automakers’ profits. For the six carmakers analysed by T&E (BMW, Mercedes, Renault, Stellantis, Volvo Cars and Volkswagen) the revenue, or the gross income, per new car has increased significantly: between 33% and 52% between 2019-2022, or around 3-4 times more than inflation in the same period. This means car prices in Europe have grown 17%-34% on top of inflation.