Electric cars dominate the Frankfurt Auto Show

“The electric car will not make its way naturally. Incentives will play a big role, ”head of Volkswagen

Herbert Diess

so. The world's largest car manufacturer launched a new fully electric compact car called ID.3 on Tuesday.

Sales of electric cars in Europe, which have some of the world's most stringent emission requirements, are still anemic. In the first half of this year, all electric and plug-in hybrid cars accounted for only 2.4% of total car sales in the EU.

Globally, the electric car market is also a small niche, but car companies and their parts suppliers say they have little choice but to shift the bulk of research budgets to battery-powered models.

Tougher emission regulations in Europe, China and the United States make it difficult for companies to reach the goals of reducing air pollution from pipes without selling more electrified models. This has led many car manufacturers to pour money into battery technology and develop a network of road drivers to support tanking.

For example, Volkswagen has invested nearly $ 1 billion in Swedish startup Northvolt AB to build a battery factory in Germany.

Profits from automakers such as Daimler and

BMW
AG

BMW 0.06%

has swelled under the weight of the huge investments made in electric cars, but the companies say there is no alternative.

“We have to invest and we are better placed than anyone to pay the price. Electric cars do not come for free, says BMW's chief financial officer

Nicolas Peter

so.

Producing an electric car generally costs $ 12,000 more than making a comparable gasoline car, and parity will not be reached in about five years, according to consultancy McKinsey & Co. The battery alone costs between $ 5,500 to $ 7,700 per vehicle, Volkswagen Mr Diess said.

Without a significant technological breakthrough, automakers recognize that they must rely on building volume and economies of scale to help bring prices down.

"There is no doubt that we must drive These costs will be reduced over the next few years," says Daimler CEO Ola Källenius. "You can't exactly influence what customers want to buy." The company's Mercedes brand revealed this This week a concept for a fully electric version of its flagship S-Class sedan.

The electric cars shown in Frankfurt this week – which also included a hatchback from

Honda Motor
Co.

and the first hybrid model from Italian supercar manufacturer Lamborghini, one

Audi
AG

subsidiary – contrasts sharply with car shows in Detroit and New York earlier this year. At the US exhibitions, sports utility vehicles and pickup cars took center stage, and fewer plug-in models made their first debut.

While automakers sell more electric models in the United States, many buyers have resorted to low gasoline prices and bought large cars that use more fuel, rather than less.

Many of the latest electric car models can travel 200 miles or more on a single charge – a huge improvement from several years ago when 100 miles or less was more typical. The new VW ID.3, for example, will offer a range of as much as 550 kilometers, or 342 miles, depending on the battery option.

But even with the expansion of the reach, potential customers are still afraid to run down the battery on a longer journey and do not have a place to connect. While the situation has improved and new charging stations are under construction in Europe, the steep price of electric vehicles and anxiety related to battery range remains the biggest obstacles, according to industry leaders and analysts.

Governments in China and the United States already offer hefty incentives for electric vehicle buyers, but sales of hybrid and plug-in models are still a fraction of total sales there.

Porsche's North American President

Klaus Zellmer

said that the psychological barriers to switching from gasoline to electric will not be easy to overcome. The obstacle involves "a whole new technology," he said. The sports car manufacturer this week showed off Taycan, a powerful four-door sedan that runs on battery power only.

That is why the industry is asking governments to lend a hand.

Hildegard Wortmann,

Audi's board member responsible for sales said that Europe still has significant patches where drivers cannot charge their vehicles on the road.

She urged the European governments to follow the example of Norway, where incentives such as tax rebates for buyers and free parking have made it the first country to hit a tipping point: More than half of vehicle sales are electric.

"We have to take a look at Norway," Wortmann said. "This really small country has shown the rest of the world how to do it."

Write to William Boston at william.boston@wsj.com and Christina Rogers at christina.rogers@wsj.com