European carmakers are facing a challenge to bring down the manufacturing costs of electric vehicles (EVs) in order to compete with Chinese brands. At the IAA mobility show in Munich, executives discussed the need to bridge the cost gap and catch up with China’s lead in producing more affordable EV models.
Renault CEO Luca de Meo acknowledged that European carmakers must close the cost gap with Chinese players who have been developing EVs for a longer time. He emphasized that as manufacturing costs decrease, prices for EVs will also go down. In an effort to achieve price parity with Chinese brands, Renault plans to release their R5 EV model next year, which will be 25% to 30% cheaper than their current electric Scenic and Megane models.
Chinese EV manufacturers, including BYD, Nio, and Xpeng, have been targeting the European market and have gained significant market share. In the first seven months of 2023, Chinese EV sales accounted for 8% of the total EV sales in Europe, up from 6% last year and 4% in 2021. Xpeng has announced plans to expand into more European markets in 2024, while Zhejiang Leapmotor Technology is preparing to launch five new EV models for overseas markets, including Europe, within the next two years.
The increasing presence of Chinese EV makers in Europe has raised concerns that they may dominate the EV market. Hildegard Mueller, president of the German Association of the Automotive Industry (VDA), expressed concerns about Germany’s decreasing competitiveness in the face of international competition. She emphasized the need for Germany to invest more in electrification.
European carmakers, such as Mercedes-Benz, BMW, and Volkswagen, are taking steps to lower production costs and improve their competitiveness. Mercedes-Benz is introducing its CLA compact class and BMW is launching its Neue Klasse, both focusing on higher range and efficiency while halving production costs. Volkswagen aims to reduce battery cell costs by 50% through its partnerships in China.
While European carmakers currently lag behind China in the EV market, Xpeng President Brian Gu believes they are making a significant effort to catch up. Gu highlighted the large investments and partnerships European carmakers have made in EV technology, indicating their commitment to the transition to electric vehicles.
Auto industry analyst Ferdinand Dudenhoeffer praised Chinese battery makers for their expertise and cost efficiency, noting that batteries can make up 40% of an EV’s cost. He urged German politicians to avoid strategies that may drive Chinese battery makers away and hinder the reduction of EV costs.
The challenge ahead for European carmakers is to bring down the manufacturing costs of EVs and close the price gap with Chinese brands. With Chinese players rapidly expanding into the European market, European carmakers are under pressure to invest in electrification and make EVs more affordable for consumers.