Analysis: It's a complex question involving a huge number of factors from US tariffs to the Chinese government
There are two answers to the question on the headline. The simple answer is 'yes, Chinese competition will drive electric vehicle prices lower'. But the more complicated answer is the one to consider as it involves Elon Musk, Donald Trump, Detroit, Berlin, the Chinese government, global auto manufacturers, trade policies and tariffs.
The rise of China as a force in electric cars
China joined the World Trade Organization in 2001. With its huge population and developing economy, it has risen to be the global giant of manufacturing. For the first decade, China was the source of both cheap manufacturing and growing car sales, and it became a very profitable country for the traditional automotive companies in the United States, Germany and Japan.
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From RTÉ Radio 1's Today with Claire Byrne, RTÉ Business reporter Adam Maguire on the rise of Chinese cars on Irish roads
The Chinese government struck car gold when they appointed a returned Germany-trained engineer, Wan Gang, as their automotive guru back in 2007. He set in place the policies for China to embrace EVs and leapfrog the global manufacturers, who had great advantages with their internal-combustion-engine (ICE) technology.
The rise of lithium-Iion-phosphate batteries
One big challenge for the emerging Chinese auto companies was that the state-of-the-art lithium-ion battery was the cobalt-based cathode technology, which was largely the domain of Korean and Japanese companies. However, the not-yet-seen-as-competitive lithium-iron-phosphate (LFP) battery had a big attraction for China. It did not have patent protection in China, and it was based on cheap and easily accessible iron, rather than the more expensive and more controversial cobalt. It was cheaper to manufacture, and was even safer in operation.
The Chinese government heavily subsidized the development of LFP and related automotive startups. This has proven to be a great success. Automotive giant BYD started as a battery company and then evolved to build the car around the battery.
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From RTÉ Radio 1's Morning Ireland, are electric vehicles cheaper to run?
The fragmenting of global markets
China is such a huge car market that it makes the rest of the world looks small. About 23 million cars will be sold in China in 2024, with battery EV sales of over 6 million and plug-in hybrid EV sales of almost 5 million. Car sales in the US will come to about 16 million. Irish new car sales will be about 120,000, of which about 17,000 are battery EVs and 13,000 are plug-in hybrids.
Such savage competition within China has driven down prices for both ICE cars and EVs. The internal Chinese market is shifting to electric, and ICE sales are in decline. The Russian-Ukraine war has forced western companies to pull out of the Russian auto market, a void which has been happily filled by Chinese manufacturers looking to sell the ICE cars. Overcapacity of EVs has rapidly developed in China, pushing the Chinese companies to invest heavily in selling to Europe, the US, and all around the world.
The return of Trump
We know from the recent US election that the voters in the traditional automotive states are very unhappy with the globalisation of the automotive industry. Thousands of factories have shut and millions have been laid off in the Rust Belt over the decades.
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From RTÉ Radio 1's The Business, how will Trump's US election victory impact trade and tariffs?
Trump is promising a resurgence of ICE manufacturing with a de-emphasis of EVs, though the Detroit car companies are not necessarily on board with this as they view EVs as a critical part of the automotive future. It’s not just Trump: the Biden administration this year placed 100% tariffs on Chinese EVs, with the EU placing tariffs of up to 35%. The Chinese government responded with its own tariffs and duties.
The Elon Musk factor
We know that Musk can multi-task, with his companies in EVs, space, media, AI and his role in the incoming Trump administration. He’s definitely riding multiple horses in a way that no one else can. One challenge he has is that Tesla is very well established and competitive in China, with about half of its cars manufactured there. Musk has made the battery EV sexy for the buying public and has pushed down the price of EVs. We await to see how he, Trump and the US energy and trade departments will square the circle.
Lack of innovation in Europe and Britain
Britain has been a wonderful source of battery innovation and critical inventions in the battery world have come from there in recent decades. But they are no longer a serious player in the automotive world, which would explain why Britishvolt, the great Brexit hope for EV battery technology, went bankrupt in 2023.
From BBC News, how the collapse of Britishvolt is a a blow for UK's electric car industry
The EU is working hard to incentivise EVs, but many manufacturers are struggling. Tesla and the Chinese have been involved in serious price wars and are cutting the legs from under the European and US manufacturers trying to get into the game.
That great automotive powerhouse, Germany, is in an automotive funk, which probably explains the political and economic funks. Volkswagen is talking more about layoffs and plant closures than innovation. The great hope for European battery manufacturing, Northvolt, has filed for bankruptcy (maybe EV battery companies should not put volt is their company titles). The head of Stellantis, the parent company of Peugeot, Citroen, Opel and more in the EU, and Chrysler and Dodge in the US, has just abruptly quit.
Korean manufacturers Hyundai-Kia are doing fine and South Korea has invested heavily in battery and EV manufacturing. In Japan, Nissan is struggling, while Toyota is reigning supreme with the surge of interest in hybrids.
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From RTÉ Radio 1's Drivetime, sales of new electric cars are down 22% so far this year
Reduced interest in switching to electric
Beyond China, the growth of sales of EVs have slowed. There are multiple factors shifting driver expectations: range anxiety, public charging, electricity prices, reduced subsidies, and new car price reductions undercutting used-car values.
Can China drive the price of Irish electricity lower?
The simple answers to this one are "no" and "yes". Electricity prices are going to be relatively high for the longterm and data centres may soon be taking 30% of our electricity. A huge investment has to go into maintaining, upgrading and expanding the grid for the expanding population and the data centres - and that’s just to keep the lights on, never mind going green.
On the other hand, Chinese solar panels and electronics have definitely made the cost of solar panel installations cheaper and attractive for many homeowners in Ireland. Thus, home solar to generate electricity is a great option to power your home and EV. It’s like you have your own petrol dripping from the roof!
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From RTÉ Brainstorm, all you need to know about putting solar panels on your roof
The EV will rule in the end
Batteries are now long life and some manufacturers are warranting 1,000,000 km on their batteries, which is amazing as they are saying the battery will outlive the rest of the car. Additionally, the prices are dropping and will be driven down by lower cost models from Tesla and the global and Chinese manufacturers. European manufacturer Dacia are selling an EV priced at €16,990 in 2025. Tesla are also expected to introduce a low-price model in 2025.
In summary, price reductions in EVs are coming due to overcapacity and competition in China and the advent of low-priced models. Counterbalancing the Chinese strength, the EU and the US are now putting stinging tariffs on the Chinese exports. This will cause prices to rise or drop more slowly.
The answer to the original question? Yes, EV prices can go lower, but it sure is complicated!
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The views expressed here are those of the author and do not represent or reflect the views of RTÉ
