Volkswagen is looking at partnering with carmakers in order to produce electric vehicles that are cheaper. This will help the company compete with an upcoming wave of low-cost competitors from China.
Oliver Blume, the chief executive of the world’s second largest carmaker, told a Berlin press conference that he plans to make an EV for less than €25,000 by the end of this year.
Arno Antlitz, chief financial officer at VW, said that it was “so hard to make money in this segment”. VW is “considering” a co-operation that would “hoist the platform on many shoulders”, said Antlitz.
EVs tend to be €15,000 higher priced than their combustion engine counterparts in Europe. Closing this gap is essential to convince consumers to switch, and to compete with the wave of cheaper Chinese models expected in the next few years.
The price of EVs is high in Europe. Despite their lower operating costs, this is one of the reasons why sales are slowing down in the region.
Blume said previously that Volkswagen wouldn’t be able produce a car for €20,000 before the end of this decade. This highlights the challenges in providing affordable mobility to Europeans, especially as the EU plans to phase-out combustion engine cars by 2035.
The battery makes up 40 percent of the cost of EVs, but traditional carmakers continue to make most of their profits on cars that use older technology.
The European Commission is investigating if Chinese automakers receive domestic production subsidies which will allow them undercut European prices for models exported to the area.
Some European automakers have already combined forces in van production. In the past, some of them also joined forces to produce smaller cars – a segment that is more difficult to profit from.
Renault, the French automaker, confirmed to VW last month that they were in discussions about developing lower-cost EVs. Renault’s Dacia brand announced this week that its budget EV Spring, imported from China, will be sold in the UK for less than £15,000.
To manufacture models in Europe at this price, companies will need to further reduce costs.
VW previously announced that the ID2, their cheapest EV would be launched next year with a starting price of approximately €25,000.
BYD is the Warren Buffett owned carmaker, which last year overtook Tesla as the largest seller of EVs in the world. It has ambitious plans for Europe and aims to be one of Europe’s top three EV brands by the end the decade. BYD, despite its small market share, plans to start manufacturing EVs in a new factory in Hungary by the end of next.
VW confirmed possible partnership talks as it announced that it expects sales growth to slow from 15 percent in 2023 to 5 percent this year. The company said that EV sales for 2023 will make up 8.3 percent of its total in light of the recent cooling in demand.
Matthias Schmidt, a independent auto analyst, said that it was vital for carmakers “to pool their spending in a ‘band-of-brothers’ manner” in order to reduce the cost of vehicles.
He added that “higher tariffs imposed on Chinese imports by the EU may also give industry breathing space, but the industry will likely remain reliant upon the strength of their brands to offset the higher prices [than] Chinese model.”