Stellantis CEO Carlos Tavares is cautiously watching EVs in China. Bridget Bennett/Bloomberg via Getty Images
One of the big problems for automakers as they transition to electric vehicles is that traditional cars still generally cost less. That’s important for people who buy cars to make ends meet.
But in China, EVs are actually more affordable than gas-guzzling cars. And Chinese EVs are increasingly being exported to markets around the world, selling at prices that are difficult to match.
This has worried automaker leaders outside China. Stellantis CEO Carlos Tavares this week attributed the rise of Chinese automakers to Japanese automakers entering the U.S. in the 1970s, followed 30 years later by South Korean rivals. I likened it.
Next is China’s turn to establish itself, he suggested, which poses a threat to established automakers like Stellantis, whose brands include Dodge, Chrysler, Jeep, Ram and Maserati.
“China’s aggression is probably the biggest risk facing Tesla and companies like us right now,” Tavares said. “We have to work very hard to ensure that we give consumers a better product than the Chinese.”
Perhaps the most feared Chinese automaker is BYD, backed by Warren Buffett’s Berkshire Hathaway. The company recently surpassed Tesla in global EV sales.
“Nothing can match BYD on price. Times have changed,” Michael Dunn, CEO of Asia-focused auto consultancy Dunn Insights, said recently. financial times. “Boards in the United States, Europe, South Korea and Japan are in a state of shock.”
One of the reasons BYD keeps costs low is that it owns the entire EV battery supply chain, from raw materials to finished battery packs. Batteries make up about 40% of the price of a new electric car.
Challenge to China’s EV
Chinese EVs are currently flooding American roads thanks to protectionist policies that impose a 25% tariff on Chinese-made cars on top of the standard 2.5% tariff on imported cars. But U.S. lawmakers are concerned that Chinese automakers will take advantage of the North American Free Trade Agreement and use factories in Mexico to avoid such tariffs.
“So do we want Chinese automakers to take a large share of the U.S. market in the next 20 years, or in the next 10 years? We don’t know. That’s the question,” Tavares said. “So how do we prevent something like that from happening, beyond protectionist decisions that are out of my hands? It’s about making the consumer happy.”
Tavares said Stellantis plans to launch 18 new EVs this year, including eight in North America, but “the job is not done” until EV prices are comparable to traditional car prices. .
In Europe, where automakers are less protected from Chinese competition, Stellantis is taking orders for a new electric car, the Citroen e-C3. The price is set to compete with low-priced models from Chinese rivals such as Great Wall Motors. The e-C3 costs 23,000 euros ($25,100) and has a range of 320 kilometers (199 miles). It is scheduled to be in showrooms in the second quarter. The entry-level version, scheduled for 2025, will be sold for 19,990 euros.
Avoid a “race to the bottom”
Tavares noted that both models will be sold at a profit. Last month, he warned of the risk of becoming embroiled in harmful price competition.
“If we ignore the reality of costs and lower prices, it will be a disaster. We are trying to avoid a race to the bottom,” he said. “I know of companies that have slashed prices so much that their profitability has collapsed dramatically.”
He did not elaborate on which company he was referring to, but his comments came shortly after Tesla lowered the prices of its Model Y across Europe and both the Model Y and Model 3 in China.
Read more: Ford CEO, long concerned about China’s EV dominance, says ‘the world has changed’ and plans to work with rivals to develop cheaper batteries
Tesla warned on a conference call with investors last month that sales growth would be “significantly lower” this year after a disappointing fourth quarter. CEO Elon Musk said his EV maker is “between two big waves of growth.” Tesla plans to start producing entry-level EVs starting at $25,000 next year, hoping to better compete with Chinese rivals and cheaper gas-powered cars.
Mr. Musk also keeps a close eye on BYD and other Chinese automakers.
“If trade barriers are not established, most of the world’s car companies will go out of business,” he told investors last month. they are very good. ”