Europe's carmakers target China's cheap EV edge at Munich car show

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A Renault wallbox charging station is used by a Renault Captur hybrid car at a dealership in Les Sorinieres

A Renault wallbox charging station is used by a Renault Captur hybrid car at a dealership in Les Sorinieres, near Nantes, France, October 23, 2020. Picture taken October 23, 2020. REUTERS/Stephane Mahe/File Photo Acquire Licensing Rights

  • Challenge to bring down European EV manufacturing costs
  • Lower costs to close price gap with China EVs
  • China EV sales account for 8% of European total through July
  • Renault's R5 EV to be 25%-30% cheaper than Scenic/Megane

MUNICH, Sept 4 (Reuters) - Europe's carmakers have a fight on their hands to produce lower-cost electric vehicles (EVs) and erase China's lead in developing cheaper, more consumer-friendly models, industry analysts and executives said at Munich's IAA mobility show.

"We have to close the gap on costs with some Chinese players that started on EVs a generation earlier," Renault (RENA.PA) CEO Luca de Meo told Reuters at the car show, adding when manufacturing costs decline, prices will also go down.

De Meo said as part of the French carmaker's drive toward price parity with the Chinese, its R5 EV due out next year will be 25% to 30% cheaper than its electric Scenic and Megane models.

Chinese EV makers, including BYD (002594.SZ), Nio (9866.HK) and Xpeng (9868.HK) are all targeting Europe's EV market, where sales soared nearly 55% to about 820,000 vehicles in the first seven months of 2023, making up about 13% of all car sales.

According to auto consultancy Inovev, 8% of new EVs sold in Europe so far this year were made by Chinese brands, up from 6% last year and 4% in 2021.

About 41% of exhibitors at this year's Munich event are headquartered in Asia, with double the number of Chinese companies attending, including EV makers BYD and Xpeng and battery maker CATL (300750.SZ).

"What used to be a performance for the German car industry to demonstrate its extremely strong position is now a meeting of equals between progressive players from around the world, especially China," said Fabian Brandt of consultancy Oliver Wyman.

The arrival of Chinese EV makers in Europe has raised concerns they will undercut local carmakers and dominate EV sales.

The average price of an EV in China was less than 32,000 euros ($35,000) in the first half of 2022 compared with around 56,000 euros in Europe, according to researchers at Jato Dynamics.

"Europe needs to stop being naive from a macroeconomic point of view in the face of China," Renault's engineering head Gilles Le Borgne, told journalists on Sunday, pointing to the country's control of the full battery supply chain.

Mercedes-Benz (MBGn.DE) will present its CLA compact class and BMW (BMWG.DE) its Neue Klasse, both of which target higher range and efficiency, while halving production costs.

Volkswagen (VOWG_p.DE) CEO Oliver Blume told reporters that through its partnerships in China, the carmaker aims to cut battery cell costs by 50%.

"We will have to work hard on the cost side," Blume said.

While carmakers inside the show were talking up their green vehicles, activists from Greenpeace staged a protest against emissions from their fossil-fuel powered cars that are still being produced.

Protesters sank three upper sections of cars into an artificial lake in front of the auto show, holding up signs reading "Auto industry sinks climate protection" and "Shrink Now Or Sink Later".

($1=0.9273 euros)

Writing by Nick Carey; Reporting by Victoria Waldersee, Gilles Gillaume and Christina Amann; Editing by Friederike Heine, Clarence Fernandez and Sharon Singleton

Our Standards: The Thomson Reuters Trust Principles.

Autos correspondent in Germany, covering the industry's transition to electric vehicles. Previously reported on the impact of the COVID-19 pandemic on the retail sector in South Asia, China and Europe, and wider general news. Formerly at YouGov and Economy, a charity working to produce accessible economics coverage.

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