Will I be forced to buy an electric vehicle?
Ola Källenius, the former CEO of Mercedes-Benz and head of the European Automobile Manufacturers’ Association warning about a potential “collapse” of the European car market isn’t just a concern for big car manufacturer executives; it has very real implications for us, the consumers. His “heavy rain, hail, storms, and snow” analogy points to a coming together of factors that will fundamentally change the way we buy and own a car.
Here’s what that could mean:
Higher Prices and Less Choice
- The Disappearance of Affordable Cars: The shift to electric vehicles (EVs) is making cars more expensive to produce due to battery costs and the technology required. European car manufacturers are focusing on high-margin, premium models to recoup their massive investments. This means the affordable, entry-level cars we’re used to, like the Ford Fiesta or Volkswagen Up!, are either being discontinued or becoming significantly more expensive.
- The “Hidden Battery Tax”: Some analyses suggest that even the price of new petrol cars is being inflated. Car manufacturers are reportedly adding a few thousand pounds to the price of every new car to fund their EV development, a cost that is passed directly on to us, the consumer.
- Fewer Options for Internal Combustion Engine (ICE) Cars: As the 2035 ban on new ICE (diesel and petrol) cars approaches, car makers will likely prioritise their EV lineups. This could mean fewer models, fewer engine options, and less investment in the technology for traditional petrol and diesel cars.
A Shift in the Used Car Market
- Fluctuating Used Car Prices: The new car market’s instability will directly impact the used car market. As new car prices rise, demand for used cars may increase, driving up their value. Conversely, there could be a rapid sale of used ICE vehicles in the years leading up to the 2035 ban, causing their value to plummet.
- A “Depreciation Disaster”: If the transition to EVs is bumpy, a lot of consumers might find themselves with negative equity on their car loans, where the value of their car is less than what they owe on it. This is particularly a risk with Personal Contract Purchase (PCP) schemes, which are very common here in the UK.
The EV Transition Won't Be As Smooth As Advertised
- Lack of Infrastructure: Källenius’s criticism highlights a major problem: the charging infrastructure isn’t ready for mass EV adoption. If you’re considering an electric vehicle, you might face persistent “range anxiety” and a lack of reliable public charging stations, especially in rural areas or regions with less developed infrastructure.
- Technological Obsolescence: The rapid pace of EV development means that today’s EV could be outdated or obsolete in just a few years. Newer models will have better batteries, longer ranges, and faster charging speeds, which could lead to a significant drop in the resale value of older EVs.
Increased Competition and Tariffs
- Chinese Competition: The market is being flooded with more affordable Chinese EVs. While this may seem like a good thing for consumers looking for a cheaper option, it could force European car makers to cut jobs and potentially exit certain segments of the market. This could lead to a reliance on foreign manufacturers, making us vulnerable to international trade disputes and tariffs.
- Higher Tariffs: In response to the influx of Chinese cars, governments may impose tariffs. While this might protect local industries, it would also increase the price of imported EVs for us, the consumers, eliminating the main benefit of buying them in the first place.
In short, Källenius’s warning is a signal that car ownership is about to get more complicated and expensive. The “collapse” he warns of would not mean a total end to the car market, but rather a severe contraction and a shift in power. This may mean a future with fewer choices, potentially higher prices for both new and used cars, and a lot of uncertainty about the value of our vehicles.
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