2024-03-02 08:27:13
The European car industry is looking for ways to best manage the introduction of electric cars and to respond to the arrival of new brands, whether it is the American Tesla or the Chinese ones. Uncertainty is growing among people about what awaits cars. In 2035, the production and sale of new cars with an internal combustion engine are to stop, and the rules for their operation and development are being tightened.
In this situation, traditional European manufacturers are losing ground, even on the Czech market. On the other hand, the original strict proposal of the Euro 7 emission standard was softened by pressure from representatives of the car industry. Czech politicians also contributed to this.
Last year, Japanese Toyota and Korean Kia came close behind the long-term leading trio of Škoda, Volkswagen and Hyundai in terms of new registrations. Brands such as Renault, Peugeot and Opel jumped over. Even in 2017, both Asian brands closed the top ten in terms of sales. Representatives of both brands have ambitions to aim even higher in the rankings.
“In a European comparison, fifth place is a great success, last year Kia was on average around ninth place in Europe. But we have ambitions to move to fourth or third place in the Czech Republic in the medium to long term,” says the head of the car company’s local representative office, Arnošt Barna. To help with this, he has further investments in the factory in Žilina, where in a few years two models of battery electric cars should be produced along with the current models.
Will the production of cars with internal combustion engines really end in Europe after 2035, or will the given date be moved further?
I believe we are really moving towards clean mobility and it will probably actually happen in 2035. Synthetic fuels may play a role, but it will only be a small part of the market. There will be relatively few newly registered cars that will use them. I expect battery electromobility to prevail after 2035. And hydrogen will gradually gain ground.
Will the European car industry survive, or will it fall before competition from the East?
I would not like to comment on our specific competitors or comment on the viability of our rivals in the market. However, Asian automakers have been penetrating Europe for thirty years. Our brand built a production plant in Žilina and has been producing cars designed and constructed for Europe since 2006. We know from customer research that the brand image has moved up significantly during that time.
The arrival of other, especially electrified brands from the USA and China will understandably redraw the map of the European market. More competition means more options for customers. Whether all manufacturers will survive, whether the European car industry as a whole will survive, I do not dare to guess, but Asian manufacturers will certainly play an increasingly important role in the European area.
Can more competition make electric cars cheaper?
We see several trends. The pace of car electrification in Europe is accelerating, leading to an increase in the average price of cars sold. Electric cars are now more expensive, but they will gradually begin to penetrate even lower segments. At the same time, higher emissions and safety requirements for internal combustion vehicles increase their prices. Both price levels intersect over time. It can be assumed that electric cars will become more affordable. More will be produced, so manufacturers will achieve economies of scale. And the flows of parts and raw materials are also stabilized.
When will that turnaround happen? When do the curves intersect?
Sometime after 2030. Kia currently has four fully battery electric car models in Europe, but it wants to bring eleven of them here by 2027. There will be four more on the global market.
This will create a portfolio that covers all segments. As we gradually go to the lower ones, we will offer electric cars for less money. We assume that the cheapest ones will start around 30,000 euros, equivalent to 750,000 crowns. But these are today’s estimates. It is still premature to talk about the price of specific cars, as it will be affected by competition, prices of raw materials on world markets, the exchange rate, the size of individual cars or battery technology, which may still undergo major changes as research continues.
He has worked for the Korean car manufacturer Kia for 17 years, since 2018 as the general manager of the Czech representative office. He also worked for the Japanese brands Daihatsu and Toyota. After studying at the Czech Technical University, he worked for two years as an engineer in the design department of aircraft piston engines at LOM Prague.
Photo: Lukáš Bíba
Why did manufacturers start with electric cars from the top, starting with the most expensive ones, and not with mass production of cheaper ones?
Behind this are huge, billion-dollar investments in research and development. Therefore, relatively expensive products came to the market first. A larger car with higher equipment will offer the customer a very high level of comfort. Although fewer of them are sold, they can be offered at a higher price. Gradually, more competitors come, it is necessary to intervene in larger parts of the market, to produce more smaller cars with lower equipment and thus the need to reduce the price. From history we know such developments in other products.
So will the mass production of electric cars come and take place in Europe?
Again.
And will it be in the same factories that now make cars with an internal combustion engine?
I do not know the details of the production systems of all competitors. At our factory in Žilina, thanks to an additional investment of 2.7 billion euros, we are ready to adapt the production line to be able to produce electric cars. We plan to do it over the course of two years, and the Slovak government will support the investment in the form of tax reliefs in the amount of approximately 30 million euros, i.e. 750 million crowns. We will be able to produce cars with an internal combustion engine and electric cars on one production line.
We want to produce gasoline and diesel versions of our cars as long as there is demand and the law allows it. We will gradually phase them out of production and we assume that around 2035 we will end the production and sale of our mass models. And until then, we will gradually replace combustion ones with electric ones. The production line in Žilina allows the production of up to seven different cars at the same time in different order. Today we use it on five models, their order is arbitrary. After the additional investment is completed, electric cars will also appear among them.
How is their production on the production line different?
Investments will go into new presses and new robotic systems. In our electric cars, we use the global E-GMP platform, which has a solid protective frame for the battery built into the floor. The body is assembled in a different way than for internal combustion cars, where the chassis group with the engine and gearbox is inserted into the body in one step. In the case of electric cars, the order of assembly of the bodywork and chassis groups is different. After completion, the production line will allow switching between these types of production, which is not possible today.
The perception of electromobility is changing, subsidies will also help
Electric cars accounted for three percent of newly registered cars in the Czech Republic last year. It is one of the lowest in Europe. Will the perception of electromobility change here as well?
It’s already changing. And thanks to the recently announced state support for the purchase of an electric car for business customers, even more will change. Ten years ago, almost no one wanted to hear about electric cars, five years ago the inclination towards electric mobility was already noticeable in surveys, albeit small. And today, customers buy an electric car if it makes sense for the way they use the car.
With the current state of the infrastructure and the range of cars, it is not possible to satisfy the needs of all customers with a battery electric car. However, with the expansion of chargers, a longer range per charge or faster charging, within a few years it will be suitable for 80 percent of residents or business customers.
The subsidy you are talking about includes a contribution of up to 200,000 crowns for the purchase of an electric car, a bank guarantee for a commercial loan or support for the construction of charging stations. It will be possible to apply for it from March this year until September 2025. Won’t such an incentive create an artificial wave of demand for electric cars, which will weaken again after the subsidy is exhausted, as happened in some other European countries?
There is no telling what is artificial and what is not. We live in a regulated environment, a socially controlled market economy. As long as politics dictates restrictions and regulatory measures, some things, i.e. technologies and trends, need to be supported and others suppressed. We consider the environment and safety. It requires some regulation, because otherwise the goals that political representation sets for itself cannot be ensured.
Would subsidies for individuals also make sense?
It is correct that the subsidy program supports companies, because they mainly buy new cars. It would help even more if the subsidy was not limited only to the purchase of a car with loan financing, but it could also be used when purchasing an operational lease. There is no need to give incentives to private customers because there are relatively few of them. They can also find their way to electric cars through the used car market. If we sufficiently support the purchase of business customers, within three years many people will be able to buy a used car from this wave.
So how will the current three percent share of electric cars on newly registered cars change this year?
I would guess between five and seven percent. It would rise even without state support, but more slowly.
And what share will electric cars have in new car sales in the Czech Republic in 2030?
I expect it to be around 50 percent. Our plans include selling 75 percent of electrified cars in Europe by 2030. The situation will differ between the Czech Republic and the European average – in battery electric cars, hybrids and plug-in hybrids. And of course, it will also differ for individual brands.
You can read the entire extensive interview in the current edition of the Ekonom weekly. In it, Arnošt Barna discusses, for example, whether there will be consolidation in the market, what chance Kia has on the Czech market, or whether hydrogen-powered cars will gain ground.