COLOGNE/HAMBURG – With new Asian automotive brands such as BYD and Great Wall Motors hovering silently on Europe's borders, hoping to replicate the success they have had in their domestic car market, incumbents' trenches appear to be packed full of brand equity to bolster those defences, highlighting their emotional DNA to the customer with new model technical details almost a second thought, rather than the first. Brand equity and a rich heritage appear to be both European and North American weapons of choice in preventing an easterly onslaught in a more homogenous EV age, although SAIC (MG) and Geely (Lotus/Smart etc) have proven even this can be purchased. Talk of asymmetric trading conditions from CEOs such as de Meo (Renault) and Tavares (Stellantis) with little to lose, with minimal exposure, in singling out China, sound fearful. At the same time, however, the likes of VW can ill afford to utter such words, given China has effectively become its paymaster.
With Ford (at a behind-closed-doors event in Cologne in December) and Volkswagen (in Hamburg last month) presenting new marketing directions for both brands while unveiling new electric models to the press, there was more than the shared platform strategy – Ford has a deal to licence 1.2 million Volkswagen MEB all-electric platforms and components on which the new Explorer is based – that tied both events together. Both brands appeared to give more than just the usual marketing pitch. Highlighting where the brands had both come from, in lengthy emotion-filled clips, VW presented around 20 models from its heritage collection – while ironically filling the room with petrol fumes – and initially rolled out Imelda Labbé, responsible for Sales, and Marketing to discuss the model rather than an engineer. Meanwhile, Ford is attempting to steer their image away from Europe and pushing home their North American roots while taking the opportunity to highlight that the land of the free also happens to be where Tesla and Apple grew up, perhaps hoping for some of that Californian magic dust to rub off on the 119-year-old blue oval brand from Motor City, Detroit.
Meanwhile, VW is going back to its "sympathetic" "love-brand" image. Attending the unveiling of their MEB+-based ID.2 model in Hamburg last month, the new ID model presentation ended a marathon roadshow of pushing the brand to a handful of journalists that encapsulated a MOIA presentation, a visit to the PowerCo. Saltzgitter battery facility and taking in the Group's annual results presentation in Berlin. The iconic love brand "for the people" saw VW roll out iconic models from their museum collection such as the "love-bug" Beetle and original camper van bus and of course, ended with the latest incarnation of the MEB platform (MEB+) on which so far ten different models across all brands are based upon worldwide.
The electric people's car (read private consumer looking for an affordable, small volume BEV model) in today's electric age has mostly been apparent for its absence. However, now Volkswagen, which literally translates as the "people's car" has unveiled its new ID.2 electric model that will be the new entry-level BEV model based on the company's MEB platform.
The latest incarnation of the MEB – MEB+ – has been developed by SEAT in Spain and will likely target exactly those markets where it was conceived.
With Southern European markets, Greece Spain and Italy accounting for less than 7 per cent of Western Europe's BEV passenger car market during 2022 according to the European Electric Car Study, with a combined total of 100,700 BEV units in a 1.53 million regional market, it compares to a far greater just under every fourth passenger car (23.5%) registered in the region last year irrespective of the drivetrain. Look at the Spanish and Italian markets, and the best-selling models here include budget Dacia (Sandero, No.2 best-selling model in Spain last year with 20,782 new volumes and starting at €13,040) and baby-Fiat models (Panda No.1 model in Italy last year with 105,384 new volumes and starting at €13,800). Now as CO2 standards increase across the region from 2025 (-15% over 2021 level), markets such as Italy and Spain, dominated by small cars, didn't previously cause an issue for OEMs hoping to achieve CO2 fleet average targets compliance due to their low CO2 fleet footprint, averaging 118.8g/km (WLTP) in Italy and 120.4g/km in Spain in 2022 according to Unrae and Anfac data.
The EU-wide CO2 fleet average is around 120g/km in the WLTP test cycle (95g/km NEDC). CO2 fleet targets apply to all 27 member states while also encompassing Norway and Iceland. An increased rate of EV adoption in the 'new' Eastern member states still saw these markets accounted for less than three per cent of the EU + EFTA + UK region last year. Compare that to the 10 per cent share of the same region when it comes to the total passenger car market according to ACEA data and the requirement to increase BEV adoption in these markets becomes apparent. With a 15 per cent EU CO2 fleet average reduction from 2025 over 2021 level and an even great 55 per cent reduction from 2030 more affordable BEVs are required for these markets to keep the CO2 show on the road. Vehicles such as the ID.2 (or identically based Cupra UrbanRebel – a Škoda version will be available too), which will be priced under €25,000 according to Volkswagen, will be key in BEV adoption in these markets. The front-wheel driven model, offering a large luggage compartment at the rear, will come with LFP batteries in the entry-level versions, CEO Schäfer told this report. While going on to say that the profit margin from the VW model can reach 6%.
Who killed the Polo?
That is significant for a lower segment model as it indicates that, partially thanks to tighter Euro 7 legislation, which Schäfer said will add thousands to the price of a Polo due to mild hybridization and an automatic gearbox, it may well kill the Polo. The following MEB+ plus model, the ID.1, will likely be the euthanasia treatment for the small ICE segment.
Ford has already announced their departure from the Fiesta. However, part of that strategy may well be trying to push consumers into a more profitable Romanian-manufactured Puma model.
The main challenge is winning BEV adoption in the South from 2025, with government budgets stretched here; generous BEV subsidies are only expected to be on offer for a limited period as we have witnessed in North European markets slowly turning the subsidy taps off.
So the main route will be to offer the right product at the right price for a private market that is more interested in window shopping currently.
VW appears to be the first to strike with a genuine BEV for the people based on a ground-up electric platform. While Elon Musk said the most challenging thing about the industry is getting mass production up and running, he may have missed the most skilful trick of getting an affordable car to market that can turn a profit. With a BEV in toughly homologated Europe that hasn't been achieved yet, except for the Dacia Spring perhaps, the VW ID.2 looks like the real McCoy. With Chinese OEMs likely singing from the same hymn sheet, and once they build up enough volumes to justify a European production location – which appeared like it could be Ford's Saaloius plant up until a few months ago – European OEMs can't hang around.
Arguably budget-driven motoring is understandably focussed more on price satisfaction rather than an image, however Chinese OEMs still need to master clearing the 10% import tariffs to the EU and homologating a car to European standards at the budget price point and doing that profitably. The differences in quality from European and Chinese quality has narrowed dramatically.
European OEMs will need all of their brand heritage joker cards they have accumulated over the past century to make their products shine over their similar looking Asian competitors. With Ford and VW helping each other build scale and lower costs, incumbents working together to achieve a greater barrier should be more than just old friends working together.
More in-depth reporting in the full study published each month. The study now also features an in-depth look at the Chinese OEMs as their European expansion slowly begins. Are Chinese OEMs really a threat to the established European OEMs and what does the outlook look like?
May also interest you: VW Group flex muscles when it comes to common EV models while Tesla claims top BEV brand in W-Europe click here for the story
*Western Europe 18 Markets: EU Member States prior to the 2004 enlargement plus EFTA markets Norway, Switzerland, Iceland, plus UK