The European and US EV makers are racing to lower EV costs in a bid to remain competitive in the rapidly evolving electric vehicle market. This move is primarily driven by the increasing pressure from Chinese competitors who are offering more affordable EV options.

Stellantis and Renault, among other European automakers, are trying to develop more affordable EVs so they can have price tags and profit margins like fossil-fuel models, industry executives said on Thursday.

The challenge lies in finding the delicate balance between reducing costs and maintaining the quality and performance that consumers associate with these brands. However, the competition from Chinese automakers cannot be ignored, as they continue to develop more affordable EVs, leveraging low-cost labor and economies of scale.

The high price of EVs has limited their wider acceptance. To combat this, industry leaders are considering partnerships to reduce expenses. These efforts are crucial to compete against Tesla, the current EV market leader, and emerging Chinese brands offering cheaper alternatives.

This competition has also spurred discussions around potential partnerships among U.S. automakers. Ford and General Motors (GM) have expressed openness to collaborations aimed at cutting EV costs and better competing with Chinese manufacturers. Ford CEO Jim Farley and GM CEO Mary Barra stated that collaboration on EV technology could be a viable strategy to counter China’s dominance.

The pressure to reduce costs is also fueled by the need for zero-tailpipe emission vehicles to comply with stringent government regulations worldwide. Furthermore, these cost-cutting measures are crucial to protect against lower-cost Chinese automakers who are increasingly gaining a foothold in the global EV market.

Stellantis CEO Carlos Tavares highlighted the challenge of maintaining sales without compromising profit margins. He emphasized the need for cost-effective strategies amid increasing competition from Chinese EV manufacturers, such as BYD. These companies are not only expanding their reach in Europe but are also posing a threat to the U.S. market, potentially planning to produce EVs in Mexico for export to the United States.

“If I were a short-termist, I could immediately increase my sales of electric vehicles simply by letting the margins slide,” said Carlos Tavares, CEO of Stellantis, during the company’s annual results announcement, while cautioning about the challenges in the coming year.

Reports suggest that China’s BYD can produce its small Seagull EV for $9,000 to $11,000 in materials, this is about 30% lower than their Western counterparts according to Wolfe Research analyst Rod Lache.

This difference in production costs shows the urgency for Western automakers to innovate and find ways to lower EV costs without compromising on quality and performance.

Image Source: Bridge Michigan