A divide in the global transition to electric vehicles (EVs) has emerged as Chinese manufacturers seem to be rushing ahead of their Western counterparts in the production and sale of EVs. 

This is according to automotive business intelligence group JATO Dynamics’ latest report – ‘EV price gap: A divide in the global automotive industry’, which explores how Chinese automakers have made significant strides in their ability to produce competitively priced EVs, sparking a shift in traditional market dynamics.

According to JATO data, while the average retail price of electric cars available in China was 37% and 26% higher, respectively, than those available in Europe and the US in 2015, this trend has since reversed. 

In the second half of last year, the average retail price of a battery electric vehicle in China fell to €31 829, while rising to €55 821 in Europe and €63 864 in the US over the same period. 

A year later and the price gap has widened further, with the average retail price of an EV in China now less than half the price seen in both Europe and the US. 

In the first half of this year, an electric car cost, on average, €31 165 in China, €66 864 in Europe and €68 023 in the US.

Despite efforts by Western vehicle makers to produce more affordable EVs, these models continue to cost more than their petrol and diesel equivalents, states the JATO report.

Today, consumers would need to spend at least €18 285 and €24 400 to buy an EV in Europe and the US, respectively – this is 92% and 146% more than they would need to pay for the cheapest combustion car available. 

In comparison, in China the cheapest EV costs 8% less than the cheapest internal combustion engine (ICE) equivalent.

The affordability of the country’s EV offering has also driven China’s growth in emerging markets, where its vehicle manufacturers have become the preferred choice among consumers, states JATO.

In the first half of this year, Chinese vehicles accounted for the majority of EV sales in Israel (61%), Russia (91%) and Thailand (79%), and they had a market share of more than a quarter in Brazil (27%), Malaysia (28%), Mexico (30%), the Philippines (33%), Chile (27%) and Indonesia (29%).

China’s EVs are not only competing on price, but also in terms of quality and power. 

Today, China can produce and sell an electric car with 200 hp to 300 hp for an average of €30 500 to $33 150, explains the JATO report.

For example, BYD offers its Seal – a midsize sedan – with 204 hp on its Elite trim in China for €24 106/$26 197. 

In Europe, the closest rival in price is a Renault Twingo Equilibre – a city-car produced in Slovenia – priced at €24 320/$26 430, with only 81 hp.

In addition to its focus on affordability, China’s success comes as a result of production across a range of models and different segments, explains the report.

“With global ambitions, China’s 170 local car brands have made efforts to ensure they have targeted every segment with models suited to the preferences of consumers across the world. 

“This approach differs to that taken by Western [manufacturers], which have historically positioned EVs within the premium segments.”

In China, consumers can choose from 235 different EVs, however, in Europe and the US the range is far smaller, with 135 and 51 models available, respectively, in each market.

Government Support has been Key
Over the past decade, the Chinese government has provided robust support for the domestic EV industry through its New Energy Vehicle Industry Development Plan (2021 – 2035), with subsidies totaling $57-billion between 2016 and 2022.

Consumers in China have also benefited from significant tax breaks when buying an electric car. 

Almost all EVs sold in China are exempt from a vehicle purchase tax, making them more affordable for drivers and boosting overall consumer demand and revenue for automakers.

While many European countries do offer some form of financial support to aid the growth of their EV markets, the benefits and incentives on offer differ widely. 

China’s advantage over the US and Europe in the production of cheap EVs can also be attributed to the country’s comparatively low labour costs. 

While European countries typically have some of the highest labour costs in the world, with an hourly minimum wage of around €302, Beijing has the highest hourly minimum wage in China at RMB 26.4, or $3.73.

“As China becomes an increasingly influential player on the global automotive stage, its brands are becoming more visible in countries where, just a few years ago, consumers would not have considered them a viable alternative,” says JATO Dynamics global analyst Felipe Munoz.

“This is a trend that has been driven by the relative affordability of its models in comparison to those produced by its Western peers, and while the US and the EU have responded to the challenge posed by China through major policy decisions, policy alone will not be enough to address the issue of affordability. 

“Rather, Western [vehicle manufacturers] must shift their focus towards the research and development of new technologies and production processes designed specifically for a fully electrified future.”