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German auto giant Volkswagen (VW) is planning to introduce a new fully electric vehicle (EV) in Europe that will be priced at or below $22,500, according to Electrek.
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The car will be released in 2023 under the Seat brand, VW’s low-cost car brand based in Spain. Not much more detail is known about the car, including whether it’ll be a sedan, crossover, or hatchback.
Here’s what it means: VW is trying to build potential EV buyers’ awareness of its low-cost EV far in advance of its release, and it is doing so in a particularly critical market.
- Persistently high prices are a top barrier to EV adoption, and this VW model will be one of the cheapest on the market to-date. For example, over half (51%) of registered drivers in the US who haven’t bought an EV cited cost as a factor for their non-purchase — the most frequently cited barrier to adoption according to a recent Arthur Little study. Most of the "cheapest" EVs on the market today are several thousand dollars more than the forthcoming VW model — the Nissan Leaf, for example, starts at about $30,000.
- Publicizing the car and its price point four years ahead of its release will help VW build consumers’ awareness of — and appetite for buying — the car. It’s possible that by 2023, other automakers in Europe — like Fiat or Renault — will have EVs that compete directly with the forthcoming VW model. By announcing the car now, VW likely hopes to be an early mover by drumming up consumers’ interest in the vehicle, in particular among those budget-minded buyers who are currently priced out of the EV market.
- Europe is the ideal market for VW and other automakers to experiment with new, low-cost EVs because of its accelerated adoption timeframe. The European Union (EU) has a series of aggressive goals for combating climate change, including incentives for consumers to buy EVs. That’s made the region one of the leaders in terms of EV sales. For instance, over half (58%) of vehicles sold in Norway last month were fully electric, the highest rate of any country in the world. In comparison, only about 2.5% of global EV sales in Q2 last year were electric, according to Bloomberg NEF data.
The bigger picture: The European market is an essential testing ground for low-cost EVs, and automakers can build on their experience there once they expand low-cost EVs to other geographies. The EU’s aggressive goals for mitigating the effects of climate change and consumers’ acceptance of EVs mean that in the near-term, the continent is the best environment for automakers to test consumer reception to low-cost EVs. In the next few years, we expect many other carmakers — based in Europe and elsewhere — to reveal plans to release new electric models in Europe. These companies will eventually need to broaden their efforts beyond Europe if they hope to maximize EV sales. Once they do so, the results of early trials in Europe could provide a roadmap for how to position EVs for budget-minded consumers in other geographies.
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