Main points (to make up for the clickbaity title):
Challenge to bring down European EV manufacturing costs
Lower costs to close price gap with China EVs
China EV sales account for 8% of European total through July
Renault’s R5 EV to be 25%-30% cheaper than Scenic/Megane
MUNICH, Sept 4 (Reuters) - 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, 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 (RENA.PA) CEO Luca de Meo told Reuters at the car show, adding when manufacturing costs decline, prices will also go down.
…continues
They creates this mess. This is a perfect “LeopardAteMyFace” situation.
For the last 15 to 20 years car makers have been fighting over themselves to get a foothold into the domestic Chinese market. To do so, the Chinese government required these foreign carmakers partner with a local company. Those local Chinese companies then had access to intellectual property, engineering data, design, planning and a whole host of other internal manufacturing data that was decades ahead of them.
Chinese carmakers were a good 50 years behind the rest of the industrialized world at the turn of the millennium. These days, they are roughly only a few years behind, to actually beijg ahead of them in some ways. All while still having some big labor savings. These Western car makers essentially trained their replacements and they did it for that sweet, sweet short term profit, while the Chinese government was playing the long game.
It’s quite a bit more complicated than that. Those joint ventures were for traditional cars, and even today Chinese automakers aren’t that great at making internal combustion engines. But in EVs, the Chinese didn’t get significant help from joint ventures; their EV industry predates foreign involvement (Tesla only set up there in 2018, a decade after BYD already started making their own EVs).
Sure, the Chinese probably picked up a lot of general industrial know-how from foreign investors, but a lot of their EV expertise is also based on figuring things out for themselves, and seizing an opportunity to exploit a new technology and disrupt slow moving incumbents.
EVs are easily.
They are considerably less complicated than ICE cars. And since they’ve been building iPhones and Playstations and TVs for a couple of decades now, they have the expertise to manufacture electrical components which is where they have learned about the E in EVs.
This the real truth. Anyone can make a BEV. It implies nothing when someone does. European car makers can do so if they wanted to. The problem is that people don’t want BEVs. They’re just too expensive and limiting.
Yeah, it was both. The european brands avoided electric cars for a long time, while the chinese pushed hard for them. And because electric motors and car batteries were a new technology, this was a great opportunity for the chinese to pull ahead(everyone started from 0).
And the chinese also used their cooperations and acquisitions(Volvo and Lotus are owned by the chinese brand Geely), in order to improve the conventional car making part production(everything other than the electric engine and batteries). Tesla followed a similar arc. Their motors/batteries are great, the other parts started as bad but they are improving all the time.
Also to add to that: a lot of the European carmakers also fought governments hard to give them more time with their fossil fuel cars and not to push/benefit EV as much as they wanted
Then Tesla came along and suddenly they had a lot of catch-up to do when they realised that people actually wanted those cars and now they are the ones behind the market since they slept to long
In Germany there’s a saying: “Wer nicht mit der Zeit geht der geht mit der Zeit” - basically: “If you’re not moving with the changes they will force you out eventually”
We have a similar saying:
Lead, follow, or get out of the way.
I have absolutely no love for German carmakers (at least not these days), but I do want to be fair here. The shift to electric is not as simple as people make it out to be. Yes, Tesla definitely was the one who got everything going and is still years ahead of the competition, but you have to understand that even today, EVs make up a small percent of new car sales in most countries. That percent is growing each year, but these companies have billions upon billions of dollars of tooling and know-how in how to create an ICE car, and those ICE cars still dominate the industry. On top of that most EVs are not really making anyone any money yet (except Tesla). So from I can’t blame carmakers in going about this very cautiously. With all the talk about EVs online, new car buyers are still not totally flocking to them in most countries. Early adopters are, sure, but average consumers are not. And that’s just the reality.
When the average share is held for less than 6 months it should come as no surprise that they sold their future for short term gain.
No argument there.
That’s where governments should have stepped in and said “woah. WTF are you guys doing?”
But in a free market economy, it is considered bad when governments tell companies what to do, usually.
China used the same playbook to steal Russian military tech
I worked in a big German car maker’s EV division. The waste of resources put in to not actually developing a good electric vehicle was staggering.
I was part of a 100 person team who was responsible for one cog of a data ingestion pipeline which read in analytics data from each EV car. It was already about 2 years’ in when I joined and it was a total failure. Why the fuck they were spending so much money on something so inconsequential to making a car was initially frustrating; now I think it’s just sad.
The reality is that the leadership didn’t really care. The brands are so strong that they can afford to move slowly on this. There is also a gravy train going on where money is being pumped into these projects and middle leadership are happy to sit back, do nothing, and still earn free $$$ rather than develop good tech.
Here’s one of the stories from my experience (software development perspective): https://www.srcbeat.com/2023/08/sbt/
The brands are so strong that they can afford to move slowly on this.
I really don’t think they are strong. The car industry was basically ravaged by the 2007 financial crisis and a lot of what were companies back then are just brands owned by a few of the industry players. It’s hard to believe they would survive another situation like that. I think they want to move fast, but they simply aren’t able to do so.
From Audi 2022 fiscal year:
Revenue rose 16.4 percent to a record €61.8 billion while operating profit climbed nearly 40 percent to an all-time high of €7.6 billion.
The brand is strong relative to Chinese competitors but I don’t think it will stay this way forever.
I think they want to move fast, but they simply aren’t able to do so.
They want to move as fast as they can maintain their profits. I think major shareholders would ideally like to see more tangible results from their R&D division. But it was clear at the time that it didn’t matter enough for real action. Middle management I interacted with were actively hostile to me when I spoke about, for example, making source code visible between teams. There was constant calculated behaviour to keep things the way they were and delay completion to maintain funding.
Thanks for the link. They kept repeating that on DW today: they think brand loyalty will save them… :/ strategic thinking, right there.
Interesting. It sort of does save them - but for how long? Depending on who is overseeing what projects the brand loyalty could last long enough for the particular people responsible. It’s a terrible strategy but that takes a lot less work than coming up with a new one!
Thanks for putting an actual summary in there. Much appreciated.
EVs remove our dependence upon engine and gearbox reliability or performance. I’d buy a good car rather than the badge. Currently driving a 2021 Kia eNiro and it is great. Cars from China make it look very dated already.
“The base car market segment will either vanish or will not be done by European manufacturers,” BMW CEO Oliver Zipse said on Sunday evening in reference to China’s push into Europe.
Is there a base car market in Europe at the moment, electric or otherwise? Is there even a need for one? I was able to live comfortably for ten years here without a car. When circumstances changed and I had to buy one this year, I was shocked by the prices. There really isn’t an entry level affordable market segment anymore. I don’t think there is any car designed for people entering the workforce or young professionals in lower paying jobs.
I remember buying my first car in early 2000s as a young professional. There really was a lot of choice. Not good choices necessarily (yes, I mean you, Clio), but choices.
Edit: hah! I just checked prices for clios where I live. A new one would set you back 26,000 EUR. The average income around here is 47,000/year before tax…
The real base markets are the second hands/occasions. Don’t let the bmw ceo fool you.
The sh market in my area was made completely crazy by the supply chain issues over the past few years. When I looked into it at the end of 2022, ah cars of 3-4 years were more expensive than the new ones. I could afford to wait 10 months for a new car so that’s what I went with, but had I needed a car quickly, I’d have had to part with serious cash.
It is, but that’s harder if you don’t want to throw co2 out the back end
The base car being the lowest tier? There is absolutely a demand for them but production has slowed to allow for increased profits, now the margins are bigger and they don’t want to deliver to the masses because it will eat into their margins if they produce more. They have limited choice and spec and are having s great time, we need china to come into the space and make it competitive.
That’s what I was saying too. The market has vanished because there is no supply
‘Jahreswagen’ is the true base.
New car driven by employees, low miles, sold second hand by the manufacturer. Some have very low mileage, but still the price is significantly cheaper. It’s an open secret that it’s nothing more than a way to offer price differentiation.
That and dacia.
I don’t have a car, all I would use it for is road trips, moving house, transporting family. All that can be done with renting/taxi. That said…some places have no public transit, people will still buy cars and it is a key EU industry, so it’s still something to worry about
This is the best summary I could come up with:
De Meo said as part of the French carmaker’s drive toward price parity with the Chinese, its R5 EV due out next year will be 25% to 30% cheaper than its electric Scenic and Megane models.
About 41% of exhibitors at this year’s Munich event are headquartered in Asia, with double the number of Chinese companies attending, including BYD, Xpeng and battery maker CATL (300750.SZ).
“The base car market segment will either vanish or will not be done by European manufacturers,” BMW CEO Oliver Zipse said on Sunday evening in reference to China’s push into Europe.
Mercedes-Benz (MBGn.DE) will present its CLA compact class and BMW (BMWG.DE) its Neue Klasse, both targeting higher range and efficiency while halving production costs.
Xpeng President Brian Gu said while European carmakers currently lag behind China, they have made a “huge commitment” to EVs with partnerships and large investments in technology.
Chinese battery makers setting up in Germany are helping to lower EV costs and German politicians need to make sure they are “not driven out of the country with stupid decoupling strategies,” Dudenhoeffer added.
The original article contains 514 words, the summary contains 181 words. Saved 65%. I’m a bot and I’m open source!
