US, European carmakers struggle to cut EV costs amid Chinese competition

The US and European automakers are under increasing pressure from Chinese competitors and are pushing hard to cut electric vehicle costs. They are struggling to have price tags and profit margins similar to those of fossil-fuel models. European automakers like Stellantis and Renault are working on developing more affordable EV, which are slightly more pricier than combustion engine vehicles, especially as EV sales is slowing in Europe.

Meanwhile US counterparts like General Motors and Ford are looking at possibilities to forge partnerships in order to cut EV costs and compete with Chinese rivals like BYD. “If you cannot compete fair and square with the Chinese around the world then 20% to 30% of your revenue is at risk” over the next several years,” Ford CEO Jim Farley said in a conference.

The biggest barrier in mass adoption of electric vehicles and zero-emission cars is the high cost and automakers have often struggled to keep up with the likes of Tesla and BYD in this regard. Moreover, lower-cost of Chinese EVs has heightened the competition. This has added another layer of complexity to the European and US automakers’ efforts to develop more affordable EVs.

Stellantis recently posted its full-year results and warned of a turbulent year ahead. “If I were a short-termist, I could immediately increase my sales of electric vehicles simply by letting the margins slide,” the company’s CEO Carlos Tavares told Reuters.

Since BYD and other low-cost Chinese EV makers have accelerated exports of vehicles to Europe and other regions, and US, automakers have been feeling threatened that those companies will establish factories in Mexico to ship EVs to the US.

Renault CEO Luca de Meo, while speaking after the company published its 2023 results, said that every company is trying to reduce EV prices to reach a price parity with combustion-engine models. He added that it is easier to reduce prices for smaller cars because it is possible to cut the size of the battery pack – which typically makes up around 40% of an EV’s cost.

In order to balance things out, automakers are required to cut EV costs while also cutting costs first in order to produce the profits investors seek.