One of the main hurdles to electric vehicle (EV) adoption is the price of the cars themselves. That hurdle, however, won’t be going away anytime soon as EVs are just more expensive to produce than their internal combustion engine (ICE) counterparts. And Stellantis CEO Carlos Tavares has put a precise figure on this, stating that EVs cost 40% more to produce than ICE cars.
Autocar reports that during the CES tech event held in Las Vegas last week, the Stellantis CEO said, “Anywhere you introduce technology that is 40% more expensive than the previous one you need to work hard in improving your business model through fixed and variable costs.”
The company says that they have only managed to increase EV prices over the past 18 months due to the semiconductor shortage which has created overdemand for EVs. However, as automotive manufacturing picks up its pace again, Tavares says, “You lose pricing power because you rebalance supply and demand. Then you need to work faster on reducing costs to protect margins.”
Car companies will have to absorb most of the additional manufacturing costs of EVs since, as Tavares says, “If the average transaction price increases because of the EV sales mix increase, then you have risk that the total market shrinks.”
Although partially absorbed by car manufacturers, it will still be tough to make EVs that cost less than ICE cars. EVs are generally more expensive simply for the fact they utilise lithium-ion batteries.
In a previous report, a Honda executive stated that “We [Honda] don’t really believe that the current lithium-ion technology is the long-term solution.” He says that solid-state batteries will be “the game changer for us [Honda]” as it will allow for lower-priced EVs that are “in the neighborhood of what a nice [petrol-powered] vehicle costs.”
During the chip shortage, many car companies recorded bumper profits as they cut back on discounting and other marketing expenses, reports Autocar. Stellantis made a net profit of €8 billion (approx. RM37.3 billion) in the first half of 2022, up 34% on the same period the year before, for a profit margin of 14%.