For Oliver Blume, the boss of the Volkswagen Group, Chinese electric cars do not (yet) represent a threat to European manufacturers. Given that ” their price doubles abroad “, he believes that the historical players in the industry are still well positioned.
Chinese electrics don’t worry Volkswagen
If Chinese manufacturers are able to manufacture electric cars at 20% lower production costs compared to Europeans, it is not so easy to penetrate new markets. This was revealed by the boss of the Volkswagen Group on the sidelines of the Munich Motor Show to our German colleagues fromautomobile week. According to him, the Chinese are unable to offer this level of cost in Europe “. Several reasons can explain this price gap between China and Europe.
Europe – The market share of Chinese electrified cars will increase by 50% in 2023
To sell electric cars on the Old Continent, Chinese manufacturers have to redouble their efforts and spend a lot of money. In particular to adapt their vehicles to European regulations, but also to build a substantial sales network. Not easy when you start from scratch. It is for this reason that the prices of Chinese cars currently sold in Europe are twice as high as in China. For now.
What price differences?
Take the example of the BYD Seagull. The small model from the Chinese manufacturer is offered at 78,800 yuan in China. Or the equivalent of 10,427 euros. A price level impossible to hold in Europe for an electric vehicle which is far from ridiculous with its 405 km of autonomy. Another striking example is the Xpeng P5, the basic version of which is announced from 157,900 yuan, or just over 20,000 euros. Not bad for a Tesla Model 3 competitor.
If we compare with European models, the difference is enormous. The Volkswagen ID.3, for example, is sold from 42,990 euros (before the application of the bonus). Since August 24, 2023, the order book for the ID.7 has been officially opened in Germany. The Pro version of Volkswagen’s latest 100% electric model is available from 56,995 euros (no bonus on this model).
On the other hand, if we look at the price of Chinese vehicles on the European market, this has nothing to do with the prices charged in China. The BYD Atto3, for example, starts in France from 43,690 euros (before the bonus). The Chinese car giant, on the other hand, is more aggressive with the Dolphin. The European version, competitor of the Renault Megane E-Tech or Volkswagen ID.3 is placed under 30,000 euros (before the application of the bonus).
European automakers need to cut costs
Nothing to worry Oliver Blume who considers that the European manufacturers and the brands of the Volkswagen Group in the first place, have ” automotive know-how, level of quality and heritage “. The German boss nevertheless recalls that his group is working hard to reduce production costs and that it is now a priority to be able to lower the price of electric vehicles in the near future. Volkswagen has notably promised to release the ID.2 under 25,000 euros.
Unlike Chinese start-ups specializing in electrics, the Volkswagen Group can rely on the profits generated through sales of thermal models. A way of “ finance the transition according to Oliver Blume. The European manufacturer can gradually ramp up in electric mobility, while 100% electric brands do not have this possibility.
To reduce the cost of manufacturing its electric vehicles, Volkswagen is counting in particular on a “ unified cell “. Enough to save 50% on the production costs of entry-level vehicles, according to Oliver Blume. Volkswagen is designing a battery with a unique cell design that could fit into 80% of the group’s electric vehicles by 2030.
The German manufacturer is working with Gotion to develop this battery. A Chinese manufacturer, of course. The factory in which the new Volkswagen batteries will be manufactured must start operating before the end of 2023.
Chinese brands are young but are developing very quickly. If for the moment the prices displayed in Europe are indeed higher than in China, this could well change. I am convinced that the massive arrival of Chinese electric cars will help reduce prices on the Old Continent. All brands will have to align, whether Chinese or European. This is also the great challenge for most historical brands: finding the miracle recipe for reducing production costs. Stellantis and Volkswagen are working on it. The Chinese are capable of implementing very aggressive strategies to establish themselves in Europe. Even if it means selling at a loss for a while. I think they should be taken seriously.