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China has a €10,000 cost advantage in small EVs, auto supplier says

China has a €10,000 cost advantage in small EVs, auto supplier says

FILE PHOTO: The BYD HAN EV is driven during an exhibition test drive as the Chinese electric-vehicle producer announces its expansion to the consumer market next year in Mexico, in Toluca, Nov 29, 2022. REUTERS/Toya Sarno Jordan

LAS VEGAS: Chinese automakers can build an electric vehicle (EV) for €10,000 (US$10,618) less than European automakers, an overwhelming cost advantage that will put pressure on European manufacturers in their home market, the head of auto supplier Forvia said.

As European consumers seek cheap EVs, Forvia Chief Executive Patrick Koller told the CES convention in Las Vegas on Wednesday (Jan 4) that China was producing "good vehicles" and Europe would not be able to stop imports.

The issue is "more dangerous" for Europe than the United States, Koller told Reuters in an interview, as high duties have limited China's US market share.

While the average price of electric cars has risen in Europe since 2015 from €48,942 to €55,821 and €53,038 to €63,864 in the United States, it has dropped in China to €31,829 from €66,819, taking it below the price of gasoline cars, according to a study by JATO Dynamics, which provides analysis on industry trends.

Koller said Chinese EV makers can produce vehicles for less because they have lower research and development costs, lower levels of capital spending and lower labour costs than rivals in Europe.

Forvia, the company created when French auto supplier Faurecia took 82 per cent control of German supplier Hella, is the seventh largest automotive component maker in the world. It supplies many Chinese automakers including low-cost EV leader BYD.

Europe is relatively open to vehicles imported from China, and Chinese vehicle makers as well as global manufacturers such as Tesla are rushing to step up shipments.

Countering perceptions that Chinese goods are lower quality, they have earned five-star safety ratings from European regulators.

China has a roughly 5.8 per cent of Europe's EV share, according to French auto consultancy Inovev, which predicts a steep rise in the coming years as Chinese brands build more lower-cost models.

By contrast, high duties in the US on Chinese-made vehicles have so far kept China's share of the US auto market negligible.

The outlook for global automotive demand in 2023 is uncertain, Koller said. An end to the war in Ukraine would lift prospects, but a deeper, protracted conflict could create a "far darker" scenario.

Koller said Forvia will invest more in the US, in part to take advantage of federal incentives provided in the Inflation Reduction Act signed into law in August.

Forvia sees opportunities in supplying fuel cell technology for North American pickup trucks, and Koller said he expects a fuel cell pickup to be launched in the US by 2025.

Forvia has invested in fuel cell technology company Symbio, and Stellantis NV, which owns the Ram pickup brand, said last month it was also in talks to invest in Symbio.

Forvia is on track to meet goals of boosting revenue to €30 billion by 2025, and selling €1 billion of assets this year, Koller said.

It can execute its asset sales and cost-saving even though it does not control 18 per cent of Hella’s shares. Activist hedge fund Elliott Management holds a 10.75 per cent stake in Hella. Koller said he is in no hurry to acquire the remaining Hella shares, given Forvia’s existing debt.

Source: Reuters/cm


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