European automakers are concerned about an “invasion” of cheap Chinese electric cars into the region, prompting Renault to say that it was aiming to slash production costs for its electric models by 40 percent.
Renault CFO Thierry Pieton said Thursday that the best way to fend off price competition was for the automaker to cut its own development and manufacturing costs.
The targeted 40 percent reduction is from 2027 onwards for Renault Group’s next generation of EVs.
Renault CEO Luca de Meo said the group would start seeing significantly lower production costs from the second half of this year, thanks to a fall in raw material costs.
“It’s clear we are in competition and that time is of the essence, but that’s the business we are in,” he said.
Renault Group is spinning off its EV activities into a unit called Ampere, with investment from Nissan. It hopes to take Ampere public in the coming months, depending on market conditions, de Meo said Thursday.
Delivering affordable electric vehicles has become a priority for automakers as the shift to cleaner driving has come with high prices, largely due to battery costs.
Chinese manufacturers such as BYD and SAIC have invested heavily in the shift, using lower labor costs and local battery suppliers to get a head start over many rivals.
In 2022, Chinese automakers had a 9 percent share of Europe’s EV market, nearly double the previous year’s figure, according to forecasts by consultancy Inovev. And the pace is picking up.
Like other EV makers, Renault also faces increased pressure from Tesla, which has cut prices several times this year even as that has eaten into its margins.
That is having an impact. Tesla and SAIC’s MG were the big sales winners in Europe during the first half.
25% cost advantage
Stellantis CEO Carlos Tavares said Wednesday that the competition with Chinese manufacturers would be “extremely brutal.”
“Their cost competitiveness is 25 percent [better than us]. We have to fight,” he said, describing the Chinese push as an “invasion.”
“We need to use our own costs to make sure that we keep on making profit with affordable prices for our middle classes,” he said.
Tavares said Western automakers needed to use “the same weapons” as their Chinese rivals, sourcing parts in lower cost countries and striking partnerships with battery suppliers that offer the best combination of energy, cost and weight.
“It means that we need to come up with a sourcing proposal that allows us to sell those cars like the Citroen New e-C3 at 25,000 euros or less in a profitable manner,” he said.
Stellantis will build that model starting next year at its factory in Trnava, Slovakia, which has lower labor costs than Western Europe plants.
Source : Automotive News Europe