The EV Transition is Fully Underway
A- Electrification Momentum Continues Across Europe
Electric vehicles (EVs) have moved beyond being a niche market. They now represent 16 percent of new-car sales in Europe, a significant increase from less than 1 percent in 2019. Even with the removal of purchase subsidies in some markets, like Germany at the end of 2023, sales have remained steady.
A recent survey by McKinsey & Company reveals that among car buyers who have not yet purchased an EV, 38 percent plan for their next vehicle to be electric. Nearly half of these potential buyers are considering a battery electric vehicle (BEV), while the rest are leaning towards plug-in hybrid electric vehicles (PHEVs).
Interest in EVs is slightly higher among premium-brand customers, as well as younger, environmentally conscious urban dwellers. However, the appeal of EVs is expanding beyond these groups, with the next wave of buyers likely to include older consumers with relatively lower budgets.
While almost 80 percent of European car buyers in the survey expect to purchase an EV in the future, 22 percent remain skeptical. The main concerns among prospective buyers who do not yet own a BEV are high purchase prices (37 percent), insufficient battery driving range (36 percent), and battery lifetime (35 percent). Additionally, many respondents are worried about rising electricity prices and the availability of public charging infrastructure (28 percent for both). Overall, sustainability has a minor influence on purchase decisions.
The survey suggests that a longer driving range could accelerate BEV adoption in Europe, as buyers in this region have high expectations for real battery driving range. Consumers who are considering an EV but have not yet purchased one state that a driving range of about 500 kilometers would be necessary for them to switch from an internal combustion engine (ICE) vehicle to a fully electric BEV. Interestingly, this perception has increased over time, from a 400-kilometer driving range in 2021.
Regarding charging infrastructure, consumers’ concerns extend beyond public availability. More than 75 percent of prospective BEV buyers in the survey expect public charging times of under 30 minutes to charge their battery from 20 to 80 percent.
While the overall outlook for electrification is positive, the survey reveals that 19 percent of current EV owners in Europe are likely or very likely to switch back to a traditional combustion engine for their next purchase due to their current EV ownership experience. This is a reality check, but it must be viewed in context. Globally, 29 percent of EV owners in the survey say they are very likely to switch back to an ICE vehicle for their next purchase, indicating that Europeans are less likely to revert to traditional cars than people in other regions.
B- New BEV Market Entrants Are Attracting Customer Interest
New players are entering the European EV market. In the past three years alone, more than 35 new OEMs have started selling battery electric vehicles in Europe, with many more announcing market-entry plans. In total, OEMs have announced over 400 new EV models set to hit the European market in the next three years. Many new entrants have established auto brands in Asia or North America, and several homegrown Chinese brands have also recently entered the market.
Prospective buyers are increasingly considering non-European brands, and our survey shows that EV owners are broadening their range of brands for purchase. European brands such as BMW, Mercedes-Benz, Renault, and Volkswagen remain the most popular, with 51 percent of EV owners likely to purchase from them. Southeastern Asian brands like Hyundai, KIA, and Toyota follow with 39 percent, American brands like Cadillac, Rivian, and Tesla with 30 percent, and Chinese brands like BYD, Li Auto, NIO, and Xpeng with 27 percent.
The new entrants offer BEV models across various vehicle segments, catering to the average potential EV buyer’s need for more real driving range and faster charging. Some new models also feature innovative car amenities, enhancing interior comfort, entertainment, and in-car digital experiences. If consumers view these new brands positively and adopt them, domestic auto brands could face significant challenges.