Renault Boss Expresses Concern Over EV Price Cuts

Electric Vehicles / 12 Comments

Luca de Meo said these sudden price cuts could harm the automotive industry.

Renault Group boss Luca de Meo has warned automakers about the consequences that may come with lowering their EV prices, reports Autocar.

It all started earlier this year when Tesla dramatically reduced pricing across the board. In the USA, this meant the entry-level Model Y - already a popular vehicle - received a $13,000 discount, making it an even more appealing buy.

Those in the market for a new Tesla may have rejoiced at the news, but it's caused a problem for other automakers that are just starting in the electric vehicle sphere. VinFast, for example, announced that it plans to offer promotions to remain competitive. Ford, on the other hand, has also decreased the price of the Mustang Mach-E in response to Tesla's price cuts.

While this may seem sensible, de Meo worries reduced pricing could eat into the profits of all EV makers.

2020-2023 Tesla Model Y Driving Front Angle Tesla

This isn't just a case of a CEO being greedy. He believes this could have long-term effects on the industry. "I think that a battle on pricing [for] electric cars right now when we're starting operations isn't the best thing that could happen to the industry. Because we have to invest, we have to generate a margin for electric cars. Otherwise, this will not become [a] very healthy business for the industry."

These comments reflect the thinking of Volkswagen's Oliver Blume, who recently said the German automaker would not engage in a price war. "We have a clear pricing strategy and are focusing on reliability. We trust in the strength of our products and brands," said the Group CEO.

Even though they're gaining momentum, EVs are still expensive to develop and build.

2021-2023 Ford Mustang Mach-E Rear Angle View Ford

According to de Meo, 40% of the cost of an electric vehicle can be traced back to batteries. 80% of the battery cost comes from raw materials. He told Autocar that "Everyone is trying to protect their margin. The cost of electric vehicles is still relatively high."

Lower prices in the USA, coupled with the new $7,500 tax credit, mean more Americans will be able to afford a new electric vehicle and enjoy emissions-free motoring. But, as de Meo has pointed out, this is not a sustainable business model for most EV makers.

So, why can Tesla afford to do this? Well, the brand has famously high profit margins that won't really be impacted by reduced pricing. If anything, the automaker will attract even more customers in 2023.

2021-2023 Volkswagen ID.4 Side View Driving Volkswagen

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2020-2023 Tesla Model Y Driving Front Angle
2021-2023 Ford Mustang Mach-E Rear Angle View
2021-2023 Volkswagen ID.4 Side View Driving

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