The electric vehicles paradox in Europe
From a pure innovation standpoint, electric vehicles (EVs) should have shifted into high gear across Europe by now, achieving full market penetration. Yet, they’re lagging, stuck somewhere between early adopters and mainstream acceptance. For any true market-shaking innovation, once it crosses that “chasm” from niche adoption to broader appeal, it typically follows a natural progression toward capturing the majority.
But with EVs, something isn’t clicking. So, what gives? And what lessons in innovation are hidden in this stalemate?
First, let’s talk vested interests. European automakers are sluggish in fully embracing EVs, partly because pivoting to electric means cannibalizing their existing investments in traditional factories. Sure, there’s a 2035 regulatory deadline pressing them toward change, but transformation at this scale isn’t an overnight feat. Volkswagen and others are under pressure to decommission their combustion engine lines and redirect capital to EV production. But the capital intensity and pace of change required seem daunting even for Europe’s auto giants. If cannibalization is hard, last-minute cannibalization is nearly impossible.
Then there’s the systemic issue of infrastructure and full lifecycle management. Building out EVs isn’t just about getting vehicles onto roads—it’s the entire ecosystem, from charging stations to maintenance networks. Take Hertz’s EV push with Tesla: they realized that even for large-scale buyers, maintenance and repair support lag far behind. Europe lacks the “full stack” to support mass EV adoption, revealing a chasm in readiness for the true lifecycle needs of electric fleets.
In addition, China has leapfrogged into EVs, bypassing combustion engine tech and mastering battery production on a scale Europe hasn’t touched yet. Chinese automakers are entering the EV market with more affordable options and battery production efficiencies that put Europe a decade behind. European manufacturers face 50% higher non-quality costs in battery production, underscoring the competitive disadvantage. Not that we weren't seeing this one coming; the writing was certainly on the wall and I was one of the many analysts getting absolutely flabbergasted for years when no one was seriously investing in this critical European bottleneck.
Energy security is another wild card. Europe’s politicians deciding to phased-out nuclear capacity just before facing major geopolitical energy upheavals—think Russia's invasion of Ukraine—mean electricity prices and availability are unpredictable. This energy volatility doesn’t mesh well with a future dependent on electric cars, revealing. A critical vulnerability in Europe’s transition, if any! (Adding insult to injury, we will also soon realize that we will be missing the AI train too because we have disinvested from nuclear energy production.)
Finally, let’s address pricing strategy. Many European automakers seem bent on replicating Tesla’s high-end model, focusing on premium EVs with €50-90K price tags. While that worked for Tesla, it’s myopic here. Early adopters are a different demographic from mainstream buyers, who seek affordability in the €30K range. Tesla’s initial “Master Plan” took this into account, starting with a high-end model, then investing that success into affordable mass-market vehicles like the Model 3 and further down! This is where European automakers should have started in a market already primed by Tesla (still one of the car models most sold in Europe before the VW Golf!). Sure innovation is hard but mistiming the market on what is essentially simple marketing boggles the mind!
With all of the above issues, there's a last one that is mostly not discussed... EV adoption isn’t on a simple, upward “S-curve.” Instead, it’s more of an “N-curve,” where momentum peaks and potentially stalls or even dips before regaining traction. Why? Because EVs adoption is not only about rational decision-making from consumers. They are challenging social norms and requiring behavior shifts that current models of market change don’t fully account for. This complex adoption path, as I noted back in 2017, is rarely addressed in the innovation playbook, but it’s essential to understanding EV market dynamics:
Philippe MEDA
