May 17, 2024

News and Political Commentary

Facing Chinese EV rivals, Europe’s automakers squeeze suppliers on costs

2 min read

By Nick Carey

LONDON (Reuters) – Europe’s automakers and their already-stretched suppliers face a tough year as they race to cut costs for electric models to counter leaner Chinese rivals which are bringing cheaper vehicles to challenge them on their home turf.

A big question is how much more Europe’s automakers can squeeze out of suppliers that have already started laying off workers, with many smaller companies hard hit by supply chain issues during the pandemic.

The difference between Europe’s legacy automakers and more EV-focused Chinese manufacturers will be on stark display this week at the Geneva car show, which is returning after a four-year hiatus due to the pandemic.

The only major companies holding media events are France’s Renault, and China’s SAIC and BYD – two of a number of the country’s automakers that have set their sights on Europe.

Renault is launching its electric R5 and SAIC’s MG brand will unveil its M3 hybrid. Meanwhile, BYD’s Seal sedan is shortlisted for the Car of the Year award. If it wins, it would be the first Chinese model to get the prestigious award.

“They really are like chalk and cheese,” Nick Parker, a partner and managing director at consulting firm AlixPartners, said of the legacy European automakers and their Chinese rivals.

Unlike European automakers that are reliant on external suppliers with separate supply chains for fossil-fuel and electric, their Chinese rivals are highly vertically integrated, producing almost everything in-house and keeping costs down.

That helps them undercut their European rivals. In Britain, BYD’s electric Dolphin hatchback starts at 25,490 pounds ($32,300), about 27% less than Volkswagen’s equivalent ID.3 model. Tesla works in the same way.

Chasing those rivals means European automakers’ profit margins could be “heavily challenged” moving forward because there is only so much they can squeeze out of external suppliers, AlixPartners’ Parker said.

The challenge has been made more difficult by…



2024-02-25 01:06:38

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