European carmakers scramble to cut electric model costs as sales growth slows

The arrival of lower-cost Chinese electric vehicles has added new impetus to European car makers' ongoing efforts to develop more affordable models

CEO Carlos Tavares at Stellantis, which owns Fiat and Citroen, said all manufacturers are trying to cut the costs of making electric cars

Under pressure from Chinese competitors, Renault and rival Stellantis, which owns Fiat and Citroen, are pushing hard to cut electric car costs so they can have similar price tags and profit margins as fossil-fuel models, industry executives have said. 

Europe's carmakers are trying to develop more affordable electric vehicles, which are currently more expensive than combustion-engine equivalents, as the growth of electric car sales has slowed. Along with concerns over a lack of available charging infrastructure, the high cost of electric cars has become a significant barrier to broader mass adoption for zero-emission cars.

"If I were a short-termist, I could immediately increase my sales of electric vehicles simply by letting the margins slide," Stellantis CEO Carlos Tavares told reporters. The arrival of lower-cost Chinese electric vehicles, or EVs, has added new impetus to European car makers' ongoing efforts to develop more affordable models. 

"Of course, everybody is trying to reduce the cost of EVs" to reach price parity with combustion-engine models, Renault CEO Luca De Meo told analysts. 

Mr De Meo, speaking after Renault published 2023 results, said reducing prices will be easier for smaller cars because carmakers can cut the size of the battery pack — which typically makes up around 40% of an electric vehicle cost — but means prices will remain higher for those with bigger batteries.

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But Europe's carmakers face a delicate balancing act where they need to reduce their electric car price tags, but have to cut costs first in order to produce the profits investors seek. Last October, Stellantis brand Citroen unveiled its new electric e-C3 SUV, a low-cost model starting at €23,300 aimed at taking on Chinese rivals in the affordable EV market.

Thanks to falling raw material costs for batteries, Mr Tavares said that margins between its electric and fossil-fuel models "are converging" and that he wants to accelerate that process.

"The important message is we do cost reduction first, and then we do the pricing reduction after that to try to protect the margin of the car," Renault chief financial officer Thierry Pieton told analysts. Mr Pieton added that the electric Scenic due for launch this year will start at slightly under €40,000. 

"If you look at the competition, including Chinese competition, Scenic is going to be very well positioned," he said. 

Reuters