Europe’s biggest carmakers brace for battle with China’s EV rivals

MUNICH — Europe’s carmakers have a fight on their hands to produce lower-cost electric vehicles (EVs) and erase China’s lead in developing cheaper, more consumer-friendly models, industry analysts and executives said at Munich’s IAA mobility show. 

“We have to close the gap on costs with some Chinese players that started on EVs a generation earlier,” Renault CEO Luca de Meo told Reuters at the car show. When manufacturing costs drop prices will also go down, he said.

De Meo said that as part of the French carmaker’s drive towards price parity with the Chinese, its R5 EV due out next year will be 25%-30% cheaper than its electric Scenic and Megane models.

Chinese EV makers, including BYD, Nio and Xpeng, are all targeting Europe’s EV market, where sales soared nearly 55% to about 820,000 vehicles in the first seven months of 2023, making up about 13% of all car sales.

According to auto consultancy Inovev, 8% of new EVs sold in Europe so far this year were made by Chinese brands, up from 6% last year and 4% in 2021.

About 41% of exhibitors at this year’s Munich event are headquartered in Asia, with double the number of Chinese companies attending, including EV makers BYD and Xpeng and battery maker CATL.

“What used to be a performance for the German car industry to demonstrate its extremely strong position is now a meeting of equals between progressive players from around the world, especially China,” said Fabian Brandt of consultancy Oliver Wyman. The arrival of Chinese EV makers in Europe has raised concerns they will undercut local carmakers and dominate EV sales.

The average price of an EV in China was less than €32,000 in the first half of 2022 compared with around €56,000 in Europe, according to researchers at Jato Dynamics.

“Europe needs to stop being naive from a macroeconomic point of view in the face of China,” Renault’s engineering head Gilles Le Borgne told journalists on Sunday, pointing to the country’s control of the full battery supply chain.

Mercedes-Benz will present its CLA compact class and BMW its Neue Klasse, both of which target higher range and efficiency while halving production costs.

Volkswagen CEO Oliver Blume told reporters that through its partnerships in China, the carmaker aims to cut battery cell costs by 50%.

“We will have to work hard on the cost side,” Blume said.

While carmakers at the show were talking up their green vehicles, activists from Greenpeace staged a protest against emissions from their fossil-fuel powered cars that are still being produced.

Protesters sank three upper sections of cars into an artificial lake in front of the auto show, holding up signs reading “Auto industry sinks climate protection” and “Shrink Now Or Sink Later”.

Reuters