PARIS, July 27 (Reuters) - Western automakers are concerned about the influx of affordable Chinese electric cars in Europe, leading France’s Renault (RENA.PA) to announce on Thursday its goal of reducing production costs for its electric models by 40%. Finance chief Thierry Pieton stated that the most effective way to combat price competition is for Renault to decrease its own development and manufacturing expenses. While the targeted 40% reduction is set for 2027 onwards, Chief Executive Luca de Meo mentioned that the group will start experiencing significantly lower production costs from the second half of this year, thanks to a decline in raw material costs. “It’s evident that we are in a competitive market and time is of the essence, but that’s the nature of our business,” he said.
Providing affordable electric vehicles (EVs) has become a top priority for car manufacturers worldwide as the transition to cleaner driving comes with high prices, primarily due to battery costs. Chinese manufacturers like BYD (002594.SZ) and SAIC have made substantial investments in this shift, utilizing lower labor costs and local battery suppliers to gain an advantage over many competitors. According to forecasts by consultancy Inovev, Chinese carmakers held a 9% share of Europe’s EV market in 2022, nearly double the previous year’s figure. Furthermore, the pace is accelerating.
Renault, like other EV manufacturers, also faces increased pressure from its U.S. rival Tesla (TSLA.O), which has reduced prices multiple times this year, albeit at the expense of its margins. For instance, Tesla lowered the prices of its Model Y long-range version by 25% to $50,490 this year. This has had an impact, with researchers Jato Dynamics reporting that Tesla and SAIC’s MG were the biggest market share gainers in Europe during the first half of this year.
Carlos Tavares, the CEO of Stellantis (STLAM.MI), the parent company of Peugeot and Fiat, warned on Wednesday that the competition with Chinese manufacturers would be “extremely fierce.” He stated that their cost competitiveness is 25% higher than theirs and emphasized the need to fight back. Tavares described the Chinese push as an “invasion” and stressed the importance of using their own costs to ensure profitable prices for the middle class. Western carmakers must employ “the same strategies” as their Chinese counterparts, such as sourcing parts from lower-cost countries and forming partnerships with battery suppliers that offer the best combination of energy, cost, and weight. “This means we need to develop a sourcing proposal that allows us to sell cars like the Citroën C3 at 25,000 euros or less in a profitable manner,” he said.
Once-dominant Western automakers are also striving to regain market share in China, the world’s largest car market, after losing ground to local manufacturers. Mercedes-Benz (MBGn.DE) announced on Thursday that it will adhere to its strategy and not engage in a price war to “buy” market share in China. When asked about Volkswagen’s (VOWG_p.DE) decision to produce new models with Chinese partners and potentially co-create local platforms, Mercedes CEO Ola…
Original from www.reuters.com