Stellantis, Renault race to cut costs to make EVs more affordable

Stellantis, Renault race to cut costs to make EVs more affordable

Automotive News Europe — 2024-02-15

Automotive Industry

Under pressure from Chinese competitors, Stellantis and Renault are pushing hard to cut electric vehicle costs so they can have similar price tags and profit margins as fossil-fuel models.

Europe's automakers are trying to develop more affordable EVs, which are more expensive than combustion-engine equivalents, as electric car sales growth has slowed.

Along with concerns over a lack of available charging infrastructure, the high cost of EVs 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 on Thursday after the company posted full-year results and warned of a turbulent year ahead.

The arrival of lower-cost Chinese EVs has added new impetus to European automakers' 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 when asked about prices and profitability.

De Meo said reducing prices will be easier for smaller cars because automakers can cut the size of the battery pack, which typically makes up around 40% of an EV's cost - but this means prices will remain higher for those with bigger batteries.

De Meo was speaking after Renault published 2023 results. Renault plans to introduce 10 new models this year including the key all-electric R5, a new Scenic and the Rafale.

Automakers face a delicate balancing act where they need to reduce EV 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 ($25,015) aimed at taking on Chinese rivals in the affordable EV market.

"Our mission is to reduce costs as quickly as necessary to absorb the additional costs of electrification and sell EVs at the same price as combustion-engine cars because the Chinese know how to do it," Tavares said.

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

The Fiat 500 currently starts at 16,790 pounds ($21,066) in Britain, based on Stellantis' Fiat website, while the New 500 battery-electric version starts at 28,195 pounds.

"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 when asked about recent price cuts for the electric Megane.

Pieton said the electric Scenic due for launch this year will start at slightly under €40,000 ($42,944).

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