Are European Motor Manufacturers committing suicide?

Yesterday I had to visit my local main dealer, (their name and what marque they represent is irrelevant to my point), for a part that is only available from the manufacturer.

Whist I waited for the obligatory 15 minutes to be told what I was 99.9% certain would be said before I walked through the door; “Sorry that is not something we carry in stock I can have it for you in four days”,

I killed the time looking at the cars in the show room.

They had around thirty cars on display and as is the way of things these comprised a mix of well know internal combustion powered family models and their shiny new, eco-friendly, electric versions.

Looking at the two options - the old & new- side by side I was struck that save for their power trains these were the same cars; same style, seats, carpets, steering wheel, entertainment systems, colours – identical twins save for two critical elements;

• Drive Train

• Price

The advantages of the relative drive trains we can debate for hours. All I will observe is that electric power is fine, indeed it is good, with one proviso. No, actually I have four;

1) The electric charging infrastructure:

Can this deal with the global adoption of electric vehicles? From generation to the National Grid, tdistribution, the cables under our streets, the connections to our homes and places of work, to the consumer panels and wiring in our homes; just how ready are we in the real world for universal adoption?

What are the submerged costs of electric adoption that remain unspoken?

2) The weight of electric cars:

A petrol powered Vauxhall Corsa weighs 1,156Kg – the electric model, 1,530Kg . That is 25% more. Uo scale the models and an Audi e-tron weighs in at 2,585kg whist a Quattro A7 is a comparatively anorexic at 2000 Kg.

Why does this matter? Weight is expensive. It’s expensive to move, its expensive on vehicle consumerbles such as tyres & suspension, it's expensive in infrastructure; roads, car parks, transporters and even ferries were and in large part still are built with the average weight demands of combustion engined vehicles central to their calculations of load and capacity.

3) Taxation :

Fuel and Road Tax is a huge source of government revenue. At the moment electric vehicles are largely outside the taxation net to encourage their adoption. Do you really believe this will remain the position if adoption moves from the margins?

4) Price;

Why is the electric version of a family car from the likes of Ford, the rainbow brands of VW & Stellantis; together the bread and butter of our mainstream options, over 30% - often 40%+, more expensive than their combustion powered siblings?

This last point I think is the most important to the producers and my headline title; are these companies basically signing their own death warrants?

Consider: If you drive a Vauxhall Corsa, or VW Golf, or any of the pier group of these examples the odds are you are broadly happy with your choice. It does what it says on the tin and more or less what you need it to do. It likely cost you between £15 – £25,000 if you bought it new. If you bought it on finance your likely paying around £150 -£250 a month over say 4 years with a final payment of around £5-7,000 that you will never pay. Your plan is to hand it back and start the cycle again, maybe moving from Vauxhall to VW for a different wrapper of basically the same experience.

But: If You are now looking at an electric version you are in for a shock …

A petrol powered Vauxhall Corsa Design can be bought for around £18,000 or financed for as little as £130 a month from a main dealer. An e-model? List price £31,500, best deal I can find today - £27,350 ; finance £273 a month with a final payment near to double that if it's petrol sybling.

This repeats through all the marques and all their ranges of the cars they have been selling us for decades; Corsa, Astra, Golf, Focus, Leon, Octavia, 208, etc, etc, etc .. are you willing to pay 30,40,50% more for what in terms of comfort and utility is exactly the same thing you are being offered (and have been happily driving) with a petrol or diesel engine?

At what point do you consider that the firm making this offer to you is taking a colloquial of three words, last one a four letter word beginning with “P” ?

So, back to my central question; are manufacturers committing commercial suicide against the new entrants from China and Asia by electrifying existing models and expecting their customers to simply pay more for them?

These Asian entrants (and Tesla who by their own statements have not yet launched their mass market model which they will pitch at combustion engines competitor pricing) are companies who opperate at scale and who do not have the burden of history, existing plants, huge investment in existing equipment designed to make existing models, a mental commitment to the historic model of manufacture and distribution, who are free to enter the market with fresh thinking and lower costs, who recognise that an electric car is basically a white good with wheels - a metal box powered by an electric motor, - a computer driven washing machine on wheels - and who are free to apply the manufacturing and sales methods that are used (they use) to sell white goods.

I illustrate with an example; the Chinese automotive giant SAIC Motor Corporation and a four step proposition:

1) Establish your brand – or easier buy one that failed but still has the hallo of a long history that is recognised by your target consumers.

SAIC buy MG – a model straight from the proven consumer retail play book and well used in retail by the likes of Sports Direct Model with their aqusition of brands such as Dunlop etc.

Then;

2) Buy in the best in design and marketing

SAIC don’t waste decades learning - they take this expert knowledge from the old players – MG’s team come from Nissan, Mitsubishi, Ferrari etc..

3) Have an ultra modem and low cost manufacturing base

SAIC - China

4) Price aggressively and make ownership easy and affordable

SAIC's MG branded vehicles are a beacon of this philosophy. Their MG4 model is winning numerous glowing reviews – the basic MG4 model answeres all moden design cues and undercuts the e-Corsa by an appreciable margin whilst offering a bigger vehicle in every measure, size, equipment, performance, value. The “Hot model” MG4 whilst offering Porsche beating speed and range still competes the top specification Corsa and comes in cheaper than an e-Golf on the all important issue of price.

The same route is been followed by the South Korean manufactures and the likely outcome is there to see. The “Old World" automotive powerhouse of production, Ford, VW etc are already finding resistance to their offerings as the value proposition proves at best lacking, at worst absent.

As a personal illustration; I have a 13 year old diesel estate manufactured by a major europen marque. I bought when it was five years old to take advantage of the golf course level depreciation born by the original purchaser. It has all the toys I need, is supremely comfortable, capacious and, does a reliable 50 MPG. Best of all with 60,000 miles driven by me its whole life cost of ownership to me (Purchase, Servicing, Repairs) is sitting at 17 pence a mile and as such its now a totally sunk cost. It owes me nothing; and its ongoing cost is purley my choice to maintain its conveniance. If the equation changes I can despense with it and start the cycle again with total piece of mind.

A new internal combustion powered replacement with the same levels of size, equipment, utility etc. would cost north of £50,000. An electric equivalent does not exist below £70,000. In 5 years when depreciation has facilitated an economic purchase where do you think the fiscally economic electric model will have appeared from?

• UK

• Germany

• France

• Korea

• China

Can you see why in the e-vehicle competition European Motor Manufacturers are at this point in time on a path to self-immolation?