- European Hybrid and Electric cars market had a market value of $168.3 billion in 2021
- Toyota, Tesla, BMW, Volkswagen, and Renault were the leading players in the European market
- Toyota was the dominant player in the hybrid segment, whereas Tesla was leading the electric cars segment
Competitive Landscape Overview
Competition and players’ strategies are shaped by the different sub-segments within the market, such as standard non-plug-in hybrids (HEVs), plug-in hybrids (PHEVs), extended range electric vehicles (EREVs), and battery all-electric vehicles (BEVs). As such, supply chain strategies are crucial for competition. Moreover, as price tends to be highly proportional to range capacity and battery efficiency, players target different segments with different models.
European hybrid and the electric car market is highly competitive, with a large number of automakers within it, while demand is still at the early adoption stage. Competition tends to be differentiated across segments; in hybrids, Toyota is dominant, while in electric cars there is strong competition between Tesla, BMW, Volkswagen, Renault, and others.
Leading Players
- Tesla has a strong presence in the electric cars segment in Europe, through the premium sedan Model S, the SUV Model X, and the recent sedan Model 3 and Model Y all-electric cars. Also operates a network of superchargers stations in Europe to enable long-distance driving.
- Toyota Motor is dominant in the standard hybrid segment in Europe, through its top-selling sub-compact models Prius, Auris, and Yaris brands which are among the most affordable. However, the sales of its only available plug-in hybrid (Prius Prime) in the market have been limited.
- Volkswagen Group is one of the leading players in plug-in hybrids through the VW, Audi, and Porsche brands. The company has a strong footprint in the premium-end of the market through the top-selling plug-in hybrids of its Porsche brand.
- BMW leads the market for electrified vehicles (PHEVs and BEVs). It offers an extensive range of plug-in hybrid versions of the 3 and 7-series sedans and X3 and X5 crossovers. Since 2016, the company has also been a leader in BEVs through its BMW i3 range.
- Groupe Renault, is one of the leading players in the electric cars segment in Europe thanks to the sales of its all-electric supermini-compact Renault Zoe, which was the second best-selling electric car in the market in 2019.
What strategies do the leading players follow?
- Tesla: Tesla has invested in innovation in order to offer advanced product features such as higher range performance, faster charging, and auto-pilot systems. It has also invested in infrastructure by developing its own charging network, to facilitate the adoption of its cars and retain its consumer base in the long-term, building brand loyalty and increasing switching costs for consumers. The company aims to reach both mid-market consumers who are more price-sensitive as well as upscale consumers who are more interested in performance.
- Toyota is the only major manufacturer that had completely shunned all-EVs until recently, focusing on affordable mild hybrids, in which it has pioneered low-cost hybrid technology since the introduction of the Prius in 1997. In 2019, Toyota had released 24,000 patents on its hybrid technology, to support the widespread adoption of electric vehicles by allowing manufacturers to use them for free. This indicates a strategic move to reinforce its operations as a supplier for the automotive industry and maximize its declining hybrid technology
- Volkswagen: Following the recent success of the premium VW Passat GTE plug-in, Volkswagen made the big step to tap into the mass-market demand for electric cars with the release of VW ID.3. The key behind Volkswagen’s strategy on VW ID, is the design of a dedicated platform for electric cars, the Modular Electric Drive Toolkit (MEB), which process improves economies of scale, reduces costs, and increases profit margins. Volkswagen has plans to establish the MEB platform as an industry standard and license it to competitors.
What are the competitive advantages of leading players?
- Economies of scale and synergies: Manufacturers such as Toyota, Volkswagen, BMW, and Renault which are among the largest in the world, have increased financial strength and diversity in the wider automotive industry. In this way, they are less dependent on the hybrid and electric market, while they have greater financial resources to invest in R&D which is a crucial aspect of the market. Furthermore, the economies of scale and synergies created for these players are a decisive competitive advantage, leading to higher profit margins.
- Strong Brand Image: Manufacturers such as Toyota and GM with a strong brand image in the automotive industry can exploit that brand in the hybrid and electric cars market.
- Sales promotions and forward integration: Toyota, Volkswagen, BMW, and Renault, based on their large financial muscle, are actively engaged in sales promotions tailored to local demand. They have achieved significant forward integration through control of car dealerships, after-sales services, and finance and insurance services.
- Brand Discrimination: Brand discrimination is a strong competitive advantage for Volkswagen. Its VW, Skoda, Seat, Audi, and Porsche brands are positioned across the whole spectrum of the market, from the affordable to the luxury-end.