Rising production costs continue to act as a roadblock to price parity between petrol and electric vehicles – and now one car giant has put a figure on the gap.
Carlos Tavares – the worldwide head of the giant Stellantis car group that includes Jeep, RAM, Alfa Romeo, Chrysler, Citroen, Opel and Peugeot – says technology “is 40 per cent more expensive” in electric vehicles.
The warning on the cost of manufacturing electric cars, reported by UK magazine Autocar, came as he cautioned about the potential threat to automakers and their existing factories that make petrol or diesel cars.
Stellantis has already announced a decision to ‘idle’ – car industry shorthand for stopping production but not closing – its Belvedere factory in Illinois in the US where it builds the Jeep Cherokee, from next month (February 2023).
Mr Tavares said manufacturers must find a way to absorb the extra costs to make electric cars more affordable.
“Anywhere you introduce technology that is 40 per cent more expensive than the previous one, you need to work hard in improving your business model through fixed and variable costs,” Mr Tavares told Autocar magazine.
“There is no other option today other than absorbing the additional costs of electrification.”
He also said the post-pandemic recovery would increase competition among carmakers, something already “very visible” in Europe, as well as putting more pressure on the price of electric vehicles.
“You lose pricing power because you re-balance supply and demand. Then you need to work faster on reducing costs to protect (profit) margins.