Forecast for 2025: electric cars facing a boom - thanks to falling prices

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Things are not going well with electric cars. At least that's what you keep hearing in public and published opinion. The actual situation, regardless of personal attitudes and political positions, is shown by the registration figures: In the pan-European view from the 27 EU states, the United Kingdom of Great Britain, Iceland, Liechtenstein, Norway and Switzerland, 14.8 percent of new cars were electric from January to October inclusive. This is according to statistics from the European Automobile Manufacturers' Association (ACEA). This proportion will increase significantly in 2025: The average of several forecasts is 25 percent. A quarter of new registrations in the EU will be electric. The main drivers of this development are the stricter CO₂ fleet limits, sharply falling battery prices and a large number of attractive premieres.

Let's first look at the analysis for 2024: in Germany, there has been a significant dip in the market share of electric cars. This was caused by the planned abolition of purchase premiums for commercially registered vehicles on September 1, 2023, plus the surprisingly short-notice abolition of purchase premiums for private customers at the turn of the year. The money should actually have continued to be paid for several months. As a result, Germany is below the European average in the period from January to October inclusive with 13.3 percent electric cars. Recently there has been an increase again: in October it was 15.3 percent.

Conservatives in the EU and UK have adopted CO₂ targets

The European Union's CO₂ fleet limits require the car industry to reduce emissions by 15 percent by 2025. The starting point is the 95 grams of carbon dioxide according to the abolished New European Driving Cycle (NEDC), which was valid from 2021 to 2024. Now it is 15 percent less. This stricter limit will remain constant until 2029; in 2030, the reduction must be 55 percent compared to the same period from 2021 to 2024. More is also possible: in the UK, the ZEV mandate requires 80(!) percent of new cars sold in 2030 to be locally emission-free.

There is a striking political parallel between the EU fleet limits and the ZEV mandate in the UK: Both were enacted by Conservative majorities. In Brussels, the decisions in Parliament and in the Council – were clear, as it were, in the national chamber –, although Conservatives had a majority in both chambers. The situation was similar in London, where the Tories under Prime Minister Rishi Sunak passed the ZEV mandate. It is remarkable that loud protests can now be heard from these party families.

Radical cost reduction for battery cells

There is no explicit ban on combustion engines in the European Union. However, the fact is that it is easiest for the car industry to meet the targets by producing more and more electric cars – and it is the cheapest. The cost of battery cells is falling and falling. A current source worth listening to is the Geladen Batteriepodcast from the Helmholtz Institute Ulm (HIU) and the Cluster of Excellence Post-Lithium-Storage (PoLiS) at the Ulm and Karlsruhe sites. The guest, Professor Dirk Uwe Sauer from RWTH Aachen University, reports that lithium cells with NMC chemistry are traded for 80 US dollars and those with LFP cells for 50 US dollars (around 76 and 48 euros). The key message that Sauer and other industry representatives report: The market has turned around in the last 18 months. The supply of battery cells is so large that the buyers within the automotive industry are in a better position than the producers.

Forecasts of 22 to 28 percent market share

There are different scenarios for forecasting the share of electric cars in the European Union. The International Council on Clean Transportaion (ICCT) has chosen a deliberately pessimistic calculation model: If there is absolutely no progress in combustion engines and plug-in hybrids, 28 percent of new cars would have to be electric. At the other end of the forecast scale is Schmidt Automotive Research, which assumes 22.2 percent. Roughly speaking, that is around a quarter.

The automotive industry has been aware of the targets for a long time and has aligned its model policy accordingly. More vehicles in the A, B and C segments will have to be offered in order to achieve sufficient numbers for the fleet limits. This is good news for all potential buyers who cannot afford to pay 50,000 or more euros or the associated leasing rates.

New models in the 25,000 to 35,000 euro segment

In excerpts: The Hyundai Group is launching the Hyundai Inster and the Kia EV3. Stellantis is launching the Citroën e-C3 Aircross and the Fiat Grande Panda. Renault is selling the pragmatic R4 in addition to the R5. At the BMW Group, the Mini Aceman is in the showroom. Skoda has added the Elroq, an attractive electric car, to its range. The 25,000 to 35,000  euro segment is becoming more extensive.

Volkswagen will not deliver the ID.2 and its derivatives Cupra Raval and Skoda Epiq until 2026. It is therefore to be expected that the basic version of the ID.3 will continue to be offered at an entry-level price of less than 30,000 euros. Even Toyota, the world market leader temporarily liberated by hybrid drives, will bring the urban SUV – a kind of electric Yaris Cross – onto the road.

There is every indication that this is the beginning of another continuous ramp-up. Even if national or European politicians decide to soften or abolish regulations, this will not change the reality of falling battery prices: It will get even better.

(nij)