"Europe is not ready for the change. It merely pretends to want the transformation." Stellantis CEO Carlos Tavares' brutal assessment of European ambitions in automotive electrification unfortunately proved true at the German "Autogipfel" as well. The outcome of the meeting at the Chancellor's Office is generously described as minimal consensus. The goal of having around 15 million electric cars on German roads by 2030 is still being upheld. However, there is a glaring lack of new ideas on how to achieve this "ambitious" target, as acknowledged by the optimistically inclined industry association VDA. Only the basic consensus remains intact.

They say where there's a will, there's a way. Nevertheless, if this is true, Tavares might be right after all. A path toward the rapid electrification of Europe's vehicle fleet is currently only vaguely discernible at best. Interestingly, it's the non-European competitors who are outlining this path. The political goal of rapid electrification plays into the hands of Chinese providers, as well as Tesla. Their cars are comparatively affordable, while German automakers incorporate the high production costs of electric vehicles through luxurious features. VW's new ID.7 has received excellent reviews from automotive experts. With a starting price of 57,000 euros, the car may be reasonably priced for the quality it offers compared to Mercedes and BMW. But for the vast majority of people, this "Volkswagen" is simply unaffordable. Not even a purchase incentive can change that.

Meanwhile, Tesla CEO Elon Musk is heading in a different direction. A model below the Model 3, priced at less than 25,000 euros, is set to tap into new buyer segments by 2025. Musk also has a smaller SUV below the Model Y in preparation, which is expected to cost less than 30,000 euros. While Stellantis and VW also have offerings in preparation, it remains to be seen whether they can be as consistently trimmed for margin as Tesla has successfully demonstrated with the Model 3 and Model Y. Established car manufacturers have not demonstrated this yet – despite significantly more expensive variants.

The acquisition prices are only part of the problem. Currently, leasing conditions are less favorable for electric vehicles than for comparable cars with a combustion engine. For example, the new Corsa Electric, just as the combustion engine version at Opel, is available for lease starting at 169 euros per month. This seems like an excellent offer, considering that the list price of the Corsa Electric is 75% higher than that of the combustion engine version. However, several differences emerge in the fine print. The regular Corsa requires no down payment, has a four-year term, and includes an annual mileage of 10,000 kilometers. For the Corsa Electric, a down payment equal to the environmental bonus of 4,500 euros is due at contract signing. Moreover, the contract runs for only two years and includes only 5,000 kilometers per year. Thus, per 100 kilometers, leasing the Corsa Electric costs around 85 euros before additional costs, while the combustion engine version comes in at just over 20 euros. Driving the electric car, which is listed at less than twice the cost of the gasoline model, requires paying more than four times as much when leasing.

This mainly indicates one thing: the residual value expectation of automakers for their electric vehicles is extremely low. There is a significant gap between the desire for electric cars to represent the future and the current reality in the market. This realization is also dawning on automotive managers. Tavares has already indicated that combustion engines might still be sold beyond 2035. Although he was criticized from various sides for this, he does have a point. It was unwise of the EU to set a fixed end date for the combustion engine technology. The heating law from last year demonstrated the resistance that can arise as such a date approaches. The demand for heat pumps is lower today than before the legislative proposal. For the automotive industry, which has invested billions in electrification, a similar downturn in electric car sales would be catastrophic.