The Paris Motor Show, as one of the few major automotive shows remaining, offers a good look under the surface of the motor industry and reveals striking market dynamics. Once, the show floor would have been dominated by European automotive giants and their combustion engine vehicles, but change was in the air this year. Chinese carmakers of all segments and sizes were the hottest talking points this year, as they hoped to sway potential customers who may never have even heard of them before the event. BYD, Hongqi, Skyworth, Leapmotor, Forthing, Aito, Xpeng, GAC, and more were in Europe, many exhibiting for the first time. There were sub €20k city cars (such as the Leapmotor T03), all the way to 1200hp electric hyper cars with staggering acceleration. The breadth of vehicles on display shows that carmakers are not just targeting low- or high-end but are coming equipped for all segments. Why have Chinese carmakers decided that Europe is the next market to expand into?
The XPeng P7+ was one of dozens of new EVs displayed in Paris by Chinese carmakers. XPeng's CEO confirmed the company's commitment to the European market, describing XPengs plan as 'long-term'. Source: IDTechEx (Analyst photograph)The context: A struggling domestic market, 2025 regulations, and trade tariffs
The European car market is in a challenging position. H1 2024 was a poor year for EV sales. IDTechEx's new report, "Plug-in Hybrid and Battery Electric Cars 2025-2045: Technologies, Players, Regulations, Market Forecasts", reveals that just 1.4% more EVs (BEV and PHEV) were sold in H1 2024 than in H1 2023. The report also shows that much of this slowdown can be attributed to a poor economic situation in Germany, the region's largest car market.
2025 will bring major changes to the market, albeit some that not all OEMs seem prepared for. As detailed in the report, 2025 will see a major reduction in the permissible fleet average CO2 targets of manufacturers. Put simply, they will have to sell fewer polluting vehicles or face astronomical fines. Although there are many pathways to compliance, IDTechEx research reveals that the most viable of these is to increase BEV sales share. 2025 is only the next step en route to a completely zero-emissions market by 2035, by which time IDTechEx expects the vast majority of European car sales to be fully electric. Some manufacturers are publicly against these regulations, with BMW's CEO using a speech at the Paris Motor Show to outline how these regulations would be catastrophic for the car industry. Others, such as Stellantis, say that they are ready and do not support a change to the legislation.
GAC Motor, a major OEM from China, plans to bring its brand to Europe. Its product showing in Paris included a mid-sized SUV (AION V), as well as a luxury hyper car, from its sub-brand HYPTEC HT. Source: IDTechEx (Analyst photograph)
Entering into this already complicated situation are Chinese car manufacturers. IDTechEx research firmly places the Chinese car market as the largest EV market in the world. It is estimated that in 2024, NEV (new energy vehicles, umbrella term for BEV + PHEVs) sales could reach 50% of all new car sales. This is far beyond the central government's most optimistic predictions. This growth in scale has led to decreasing costs of production, with IDTechEx estimating that BEVs are now cheaper to purchase than ICE vehicles in China. The fast growth has also led to a scramble for market shares and an ensuing price war, where OEMS cut prices to secure a market foothold at the expense of profitability. IDTechEx research indicates that the most popular BEVs and PHEVs have decreased in price by 9% and 20%, respectively, in just 1 year. Compared with this, the rest of the world is seeing prices stagnate or even increase.
This brutal price war is expected to result in a consolidation of players as stragglers are eliminated. In this context, it is unsurprising that carmakers are looking for alternative markets to sell their products. Europe is the perfect market for Chinese carmakers, but why?
- The US is a larger car market by volume but is ringfenced by the IRA and 100% tariffs on Chinese EVs.
- Europe is the next largest car market in the world.
- Market profile: Smaller car segments tend to be more popular in Europe than in the US, and this matches the domestic Chinese profile, allowing for more model crossover.
- Lack of domestic competition: European legacy automakers have brought EV portfolios to market, but these have thus far been limited to premium segments and had limited model availability. Europe also does not have a major domestic disruptor like Tesla in the US.
- A market with strong electrification potential: the EU regulations dictate that nearly all sales will have to be electric by 2035. IDTechEx estimates that this will equate to over 16 million BEVs sold in 2035, compared with just 1.8 million sold in 2023. There is a big gap to be filled.
Tariffs may not be enough, but European OEMs are not down and out
The European Union introduced tariffs against Chinese-manufactured EVs in mid-2024. These range from 9% for Tesla's built-in Shanghai to 36% for SAIC (who own MG). The tariffs were seen by many to protect domestic industry from Chinese manufacturers undercutting in price. However, the Paris Motor Show indicates that these will not be significant enough to deter OEMs, with many either raising prices slightly (still often being more affordable than domestic alternatives) or simply absorbing the tariffs. Many (such as BYD) are already planning local production in European factories that would bypass tariffs altogether. Some (such as Leapmotor) have partnered with domestic manufacturers to produce vehicles in their factories, again bypassing tariffs.
The Renault Twingo e-Tech is set to bring retro styling with a price tag under €20k to the European market in 2026. Source: IDTechEx (Analyst photograph)
Paris Motor Show did provide some hope for domestic manufacturers. Renault, Citroen, Peugeot, and BMW, all had strong electric showings. In particular, the number of models outside the traditional premium/SUV market showed things were headed in the right direction. Renault made waves with its chunky, retro-styled 'Renault 5', with a price tag of as low as €25k. It looks set to be a solid competitor to BYD's lower-cost models.
In this dynamic and challenging time for automotive, comprehensive data and analysis can help to understand the underlying trends guiding the market. IDTechEx's new report on the topic, "Plug-in Hybrid and Battery Electric Cars 2025-2045: Technologies, Players, Regulations, Market Forecasts", explores key factors such as:
- Europe: historic sales performance, EV market share by OEM, assessing each OEMs readiness for the CO2 regulations, PHEV outlook.
- USA: EPA and CARB CO2 regulations, the rise of electric pickup trucks, the impact of IRA and federal tax credits.
- China: NEV market growth, the success of PHEVs, and changes to the regulations in light of unprecedented NEV growth.
As well as exploring the key technological trends underpinning the EV market, including PoE, Li-ion batteries, and traction motors.
To find out more about IDTechEx's "Plug-in Hybrid and Battery Electric Cars 2025-2045: Technologies, Players, Regulations, Market Forecasts" report, including downloadable sample pages, please visit www.IDTechEx.com/Cars.
For the full portfolio of electric vehicle market research available from IDTechEx, please see www.IDTechEx.com/Research/EV.
Upcoming free-to-attend webinar
Despite a Challenging Year, Regulations and Technologies Are Set to Transform the Electric Vehicle Market in 2025
Mika Takahashi, Technology Analyst at IDTechEx and author of this article, will be presenting a free-to-attend webinar on the topic on Thursday 21 November 2024 - Despite a Challenging Year, Regulations and Technologies Are Set to Transform the Electric Vehicle Market in 2025.
This webinar will explore key aspects of the EV market, including:
- Deep dive into global and regional sales figures up to H1 2024, including PHEV and BEV sales, and key OEMs
- Overview of the Li-ion battery market by cathode and capacity (kWh)
- Breakdown of the EU CO2 regulations and positioning of OEMs in advance of 2025 rule changes
- Growth of the electric pickup market in the US, and EPA/CARB regulation breakdown
- Technology trends, 800V architectures, and evolving motor choices
- Market outlook until 2045
We will be holding exactly the same webinar three times in one day. Please click here to register for the session most convenient for you.
If you are unable to make the date, please register anyway to receive the links to the on-demand recording (available for a limited time) and webinar slides as soon as they are available.
About IDTechEx
IDTechEx provides trusted independent research on emerging technologies and their markets. Since 1999, we have been helping our clients to understand new technologies, their supply chains, market requirements, opportunities and forecasts. For more information, contact research@IDTechEx.com or visit www.IDTechEx.com.
