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One major problem for automakers as they transition to electric vehicles is that traditional cars still generally cost less. That matters to everyday car shoppers trying to make ends meet.<\/p>\n
In China, however, EVs are actually more affordable than gas guzzlers<\/a>. And increasingly, Chinese EVs are being exported to markets around the world and sold for prices that are tough to match.<\/p>\n That has leaders of automakers outside China worried. This week, Stellantis<\/a> CEO Carlos Tavares likened China\u2019s automotive emergence to the arrival of Japanese carmakers in the U.S. in the 1970s, followed by South Korean rivals three decades later.<\/p>\n Now it\u2019s China\u2019s turn to make its mark, he suggested, and that poses a threat to existing carmakers like Stellantis, whose brands include Dodge, Chrysler, Jeep, Ram, and Maserati.<\/p>\n \u201cThe Chinese offensive is possibly the biggest risk that companies like Tesla<\/a> and ourselves are facing right now,\u2019\u2019 Tavares said<\/a>. \u201cWe have to work very, very hard to make sure that we bring out consumers better offerings than the Chinese.\u201d<\/p>\n The most-feared Chinese carmaker is probably BYD\u2014backed by Warren Buffett\u2019s Berkshire Hathaway\u2014which recently topped Tesla in global EV sales.\u00a0<\/p>\n \u201cNo one can match BYD<\/a> on price. Period,\u201d Michael Dunne, CEO of Asia-focused car consultancy Dunne Insights, recently told<\/a> the Financial Times<\/em>. \u201cBoardrooms in America, Europe, Korea, and Japan are in a state of shock.\u201d<\/p>\n BYD keeps its costs low in part because it owns the entire supply chain of its EV batteries, from the raw materials to the finished battery packs. The battery accounts for roughly 40% of a new electric vehicle\u2019s price.<\/p>\n Chinese EVs are not flooding American roads today thanks to protectionist measures\u2014a 25% tariff on Chinese-made cars on top of a regular 2.5% one on imported cars. But American lawmakers fear that Chinese carmakers will use factories in Mexico<\/a> to avoid such tariffs, taking advantage of the North American free trade agreement.<\/p>\n \u201cSo do we want that the Chinese carmakers take a significant share of the U.S. market in the next 20 years, or the next 10 years? I don\u2019t know. That is the question,\u201d Tavares said. \u201cSo how do we prevent that from happening beyond all the protectionist decisions, which are out of my reach? Well, by making our consumers happy.\u201d<\/p>\n Tavares said that while Stellantis will launch 18 new EVs this year, eight in North America, the \u201cjob is not done\u201d until prices for EVs match those of traditional cars.\u00a0<\/p>\n In Europe\u2014where carmakers are less protected from Chinese competition\u2014Stellantis is taking orders for<\/a> the new electric Citroen e-C3. It\u2019s priced to take on budget models from Chinese rivals like Great Wall Motor. The e-C3 sells for 23,000 euros ($25,100) and has a range of 320 kilometers (199 miles). It will hit showrooms in the second quarter. An entry-level version slated for 2025 will sell for 19,990 euros.<\/p>\n Both models will be sold at a profit, Tavares noted. Last month, he warned about<\/a> the perils of getting drawn into a damaging price war.<\/p>\n \u201cIf you go and cut pricing disregarding the reality of your costs, you will have a bloodbath. I am trying to avoid a race to the bottom,\u201d he said. \u201cI know a company that has brutally cut pricing and their profitability has brutally collapsed.\u201d<\/p>\n He didn\u2019t elaborate on which company he was referring to, but his comments came shortly after Tesla cut prices<\/a> on its Model Y across Europe and both its Model Y and Model 3 in China.<\/p>\n Read more: Ford CEO, who\u2019s been worrying about China\u2019s EV dominance for years, says \u2018the world has changed\u2019 and he\u2019d work with rivals on a cheaper battery<\/a><\/p>\n Tesla, in a call with investors last month, warned of \u201cnotably lower\u201d sales growth this year after a disappointing fourth quarter. CEO Elon Musk said his EV maker is \u201cbetween two major growth waves.\u201d Hoping to better compete against both Chinese rivals and cheaper gas-powered cars, Tesla plans to start producing an entry-level EV<\/a> starting at $25,000 next year.<\/p>\n Musk, too, is warily watching BYD and other Chinese carmakers.\u00a0<\/p>\n \u201cIf there are no trade barriers established,\u201d he told investors<\/a> last month, \u201cthey will pretty much demolish most other car companies in the world. They\u2019re extremely good.\u201d<\/p>\n<\/div>\nTaking on Chinese EVs<\/h2>\n
Avoiding a \u2018race to the bottom\u2019<\/h2>\n
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