Chinese electric vehicles are $10,618 cheaper than in Europe, parts maker says (2024)

Chinese car makers can build an electric vehicle for €10,000 ($10,618) less than European counterparts, an overwhelming cost advantage that will put pressure on European manufacturers in their home market, the head of vehicle supplier Forvia has said.

As European consumers seek cheap EVs, Forvia chief executive Patrick Koller told the CES convention in Las Vegas on Wednesday that China was producing “good vehicles” and Europe would not be able to stop imports.

The issue is “more dangerous” for Europe than the US, Mr Koller said, as high duties have limited China's US market share.

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

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While the average price of electric cars has risen in Europe since 2015 from $51,424 to $58,652 ― and $53,038 to $63,864 in the US ― it has dropped in China to $33,440 from $70,203, taking it below the price of petrol cars, according to a study by JATO Dynamics, which provides analysis on industry trends.

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, Mr Koller said.

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 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 American car market negligible.

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The outlook for global vehicle demand in 2023 is uncertain, Mr Koller said.

An end to the war in Ukraine would lift prospects, but a deeper, protracted conflict could create a “far darker” scenario.

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, Mr Koller said.

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

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The company has invested in fuel-cell technology company Symbio, and Stellantis, which owns the Ram pick-up 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, Mr 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.

Mr Koller said he is in no hurry to acquire the remaining Hella shares, given Forvia’s existing debt.

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Updated: January 07, 2023, 5:00 AM

As a seasoned automotive industry expert with extensive knowledge in the field, I can confidently address the key concepts highlighted in the article about Chinese car makers building electric vehicles at a significantly lower cost than their European counterparts.

1. Cost Advantage of Chinese EVs: The article underscores a substantial cost advantage held by Chinese car makers in producing electric vehicles (EVs). Specifically, it mentions that Chinese manufacturers can build an electric vehicle for €10,000 ($10,618) less than European counterparts. This cost advantage is attributed to several factors, including lower research and development costs, reduced capital spending, and lower labor costs in China.

2. Impact on European Manufacturers: The head of vehicle supplier Forvia, Patrick Koller, emphasizes the significant impact of this cost advantage on European manufacturers. He notes that this advantage poses a substantial threat to European manufacturers in their home market, especially as European consumers seek affordable EV options.

3. Market Dynamics in Europe and the US: The article highlights the dynamics of the electric vehicle market in both Europe and the United States. While Europe is relatively open to vehicles imported from China, the situation is described as "more dangerous" for Europe than the US. High duties in the US have limited China's market share in the country, providing a level of protection to American manufacturers.

4. Reasons Behind Chinese Cost Advantage: The cost advantage of Chinese EVs is attributed to lower research and development costs, reduced capital spending, and lower labor costs in China. These factors enable Chinese manufacturers to produce electric vehicles more cost-effectively compared to their European counterparts.

5. European Perception of Chinese EV Quality: Despite the lower cost, the article highlights that Chinese EVs have earned five-star safety ratings from European regulators. This counters the perception that Chinese goods, including vehicles, may be of lower quality.

6. European Electric Vehicle Market Share: The article references data from French auto consultancy Inovev, stating that China holds approximately 5.8% of Europe's EV market share. Additionally, there is a prediction of a steep rise in the coming years as Chinese brands introduce more lower-cost EV models.

7. Global Outlook and Uncertainties: Patrick Koller, the CEO of Forvia, expresses uncertainty about the global outlook for vehicle demand in 2023. The resolution of the conflict in Ukraine is identified as a factor that could impact prospects. The article suggests that a protracted conflict could create a "far darker" scenario for the global automotive industry.

8. Forvia's Investment Strategy: Forvia, the seventh largest vehicle component maker globally, plans to invest more in the US. This decision is partly driven by federal incentives provided in the Inflation Reduction Act. Forvia sees opportunities in supplying fuel cell technology for North American pick-up trucks and anticipates the launch of a fuel cell pick-up in the US by 2025.

In conclusion, the article provides insights into the competitive landscape of the global electric vehicle market, emphasizing the cost dynamics, market share trends, and potential challenges and opportunities for key players in the industry.