Driving Towards Affordability: Auto Manufacturers Aim to Lower Electric Vehicle Costs

The race is on for affordable electric vehicles. Major European and American car manufacturers feel pressure from cheap competition emerging from China. Their aim? To reduce the production costs of electric models to match the profitability of traditional combustion engine cars.

Renault and the Stellantis group, which includes brands such as Fiat, Chrysler, Peugeot, and Citroën, are leading the charge in Europe to lower costs. This push comes amid a backdrop of escalating competition, as Chinese automakers like BYD and other affordable electric car sellers increase their exports to Europe.

Over in the United States, industry giants General Motors and Ford are expanding partnerships to combat the high costs of electric vehicle production. American manufacturers are also wary of Chinese companies, fearing they may set up factories in Mexico and start supplying the US market in volume.

The high cost of electric vehicles is one of the main reasons sales have lagged behind expectations. While there was a year-on-year increase of 69% in January, sales were a quarter lower than in December. This dip was partly due to reduced incentives for electric vehicle purchases in Germany and France, where sales halved month-on-month.

Stellantis CEO Carlos Tavares has suggested that an immediate way to boost electric car sales is to reduce margins. Similarly, Renault’s Chief, Luca de Meo, has indicated that cost reduction will be more straightforward for smaller electric vehicles by reducing the battery’s size, contributing to about 40% of the cost of electric cars. However, he also warns that the cost of larger vehicles will remain high due to the need for bigger batteries.