Automakers in China are able to make an EV for 10,000 fewer euros, or $10,618, which is below what their competitors in Europe can charge. The difference is due to their low R&D and capital expenditure costs, as well as low labor costs when compared to their European rivals. According to Patrick Koller, CEO of Forvia, a supplier of vehicles, this denotes massive cost savings, which will pressurize the European car makers in their local markets.
Speaking las week at the CES convention in Las Vegas, Koller acknowledged that the cars made in China were good and that it was going to be difficult for Europe to stop importing them since consumers in Europe continue to look for affordable EVs. He added that the situation is worse in Europe as compared to the United States because China currently accounts for 5.8% of all electric vehicle sales in Europe; those numbers are according to Inovev, a French automotive consultancy, which forecasts a sharp increase over the next few years as brands in China continue to produce more affordable models. China’s share of the U.S. auto market, on the other hand, has remained minimal due to high import taxes in the United States on vehicles made in China.
According to a JATO Dynamics study that gives industry trending analysis, since the year 2015, the average cost of an EV in China has decreased from $70,203 to $33,440, making it significantly less expensive than the cost of a gasoline-powered vehicle. In contrast, the cost of EVs has increased since 2015 in Europe from $51,424 to $58,652 and from $53,038 to $63,864 in the United States.
China’s automakers are in a rush to increase vehicle deliveries in Europe, as are other global automakers such as Tesla, because Europe is largely open to importing China-made cars. Chinese products have been rated positively by the regulators in Europe, dispelling the myth that their vehicles are of low quality.
According to Koller, the prospect for the demand of vehicles worldwide in 2023 is unclear. A resolution to the Ukrainian conflict could well improve the situation, but a longer, more intense conflict could result in the worst possible outcome.
According to Koller, Forvia will increase its investments in the United States in order to benefit from the federal incentives offered by the Inflation Reduction Act, which was passed into law in August. He further stated that he anticipates the introduction of a hydrogen-powered pickup in the United States by 2025, because Forvia foresees the possibility of equipping pickup trucks in North America with hydrogen power technology.
The increasing competition from Chinese EV manufacturers should give startups from other regions such as Lucid Motors (NASDAQ: LCID) plenty to think about as they make their long-term expansion plans.
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