European automakers fear EVs will eat into auto industry profits

Several new electric models made their debut at the recent Paris Motor Show, including PSA’s DS3 Crossback and the Mercedes EQC, but off the noisy show floor, away from the turntables, hors d’oeuvres and booth bunnies, executives are ruefully acknowledging that the transition to EVs will mean an end to the record profits of recent years.

“What everyone needs to realize is that clean mobility is like organic food – it’s more expensive,” said Carlos Tavares, Chief Executive of Peugeot, Citroen and Opel manufacturer PSA. “Either we accept paying more for clean mobility, or we put the European auto industry in jeopardy.” Tavares called BMW’s recent profit warning, which the Bavarian brand blamed in part on electrification costs, “a first alarm signal.”

According to Reuters, prices are likely to fall faster than production costs, causing red ink to flow. Volkswagen has said that its ID electric hatchback, due to go on sale next year, will be priced close to legacy versions of the Golf. “VW is about to launch a load of electric vehicles at the same price as gasolines, and therefore at a loss,” said Laurent Petizon of consulting firm AlixPartners. “Our interpretation is that the 2021 fines [for failing to meet European emissions standards] have already been factored into their sales strategy. Rather than pay penalties, they prefer to lose money on vehicles and get the market going.”

VW and Daimler have announced 30 billion euros in electrification investment between them, but each company recently warned that it would not be enough.

AlixPartners calculates that EVs still cost legacy automakers an average of 7,800 euros more apiece to produce than legacy ICE vehicles, while PHEVs cost about 5,000 euros more.

“It absolutely is impacting the profitability of the industry,” said Rebecca Lindland of Kelley Blue Book. “Demand doesn’t justify investment at all – it’s all regulation.”

This explains why, while automakers keep putting on multimillion-dollar shows for journalists to tout their commitment to electrification, they’re working diligently behind the scenes to water down or eliminate the regulations that are forcing them to produce EVs.

 

Source: Reuters

  • freedomev

    What profits? In 5 yrs it’ll be hard to sell an ICE and in 7 yrs not possible to sell one for what it costs to build.
    So they problem isn’t EVs going to take profit, it is build EVs or die.
    And the time is short as who is going to buy a car, truck that drops 50% driving off the lot and costs 500% more to run in 7 yrs?
    I’ve been driving my lightweight EVs for 25 yrs now at a fraction of an ICE’s version. Soon everyone will as who wants to pay more to pollute?

  • mipak

    Change is a natural occurrence in the Universe. Get used to it everyone. Those who fight the future eventually fade away. Profits WILL fall with the advance usage of EVs. History is full of those who failed to adjust to the future.

  • mrrumbles

    It is always necessary to point out that clean mobility may appear to be more expensive, but that’s only because the externalities of the incumbent, fossil fuel-based mobility are borne by society at large, and are thus hidden. If we could get to a more “level” playing field, the purchase price differences between the two mobility types (shrinking already) might look quite different if not be flipped entirely.