Stellantis CEO: Chinese EVs pose a danger to its automaker Tesla

Stellantis CEO Carlos Tavares is keeping a wary eye on Chinese EVs. Bridget Bennett/Bloomberg via Getty Images

A major problem for car manufacturers in the transition to electric vehicles is that traditional cars still generally cost less. That’s important for the everyday car buyer trying to make ends meet.

In China, however, electric cars are actually cheaper than gas guzzlers. And increasingly, Chinese electric vehicles are being exported to markets around the world and sold at prices that are difficult to match.

That worries leaders of car manufacturers outside China. This week, Stellantis CEO Carlos Tavares compared the rise of China’s automotive industry to the arrival of Japanese automakers in the US in the 1970s, followed by South Korean rivals three decades later.

Now it’s China’s turn to make its mark, he suggested, and that poses a threat to existing automakers like Stellantis, whose brands include Dodge, Chrysler, Jeep, Ram and Maserati.

“The Chinese offensive is possibly the biggest risk that companies like Tesla and us currently face,” Tavares said. “We have to work very, very hard to ensure that we can offer consumers a better offer than the Chinese.”

The most feared Chinese carmaker is probably BYD – backed by Warren Buffett’s Berkshire Hathaway – which recently surpassed Tesla in global electric car sales.

“No one can match BYD on price. Period,” Michael Dunne, CEO of Asia-focused automotive consultancy Dunne Insights, recently told the newspaper Financial times. “Boardrooms in America, Europe, Korea and Japan are in shock.”

BYD keeps its costs low in part because it owns the entire supply chain of its EV batteries, from the raw materials to the finished battery packs. The battery accounts for about 40% of the price of a new electric vehicle.

Take on Chinese EVs

Chinese EVs aren’t flooding American roads today thanks to protectionist measures – a 25% tariff on Chinese-made cars, on top of the regular 2.5% tariff on imported cars. But U.S. lawmakers fear Chinese automakers will use factories in Mexico to avoid such tariffs, taking advantage of the North American Free Trade Agreement.

“So do we want the Chinese automakers to capture a significant portion of the U.S. market over the next 20 years or the next 10 years? Don’t know. That is the question,” Tavares said. “So how can we prevent this from happening beyond all the protectionist decisions, which are beyond my reach? Well, by making our consumers happy.”

Tavares said that while Stellantis will launch 18 new electric cars this year, eight of them in North America, the “job isn’t done” until electric car prices match those of traditional cars.

In Europe – where car manufacturers are less protected against Chinese competition – Stellantis is taking orders for the new electric Citroen e-C3. It’s priced ahead of budget models from Chinese rivals like Great Wall Motor. The e-C3 is sold for 23,000 euros and has a range of 320 kilometers. It will appear in showrooms in the second quarter. An entry-level version, scheduled for 2025, will be sold for 19,990 euros.

Avoiding a ‘race to the bottom’

Both models will be sold at a profit, Tavares said. Last month he warned of the dangers of becoming embroiled in a damaging price war.

“If you start lowering prices without considering the reality of your costs, you’re going to have a bloodbath. I try to avoid a race to the bottom,” he says. “I know a company that has brutally cut prices and brutally collapsed their profitability.”

He did not elaborate on which company he was referring to, but his comments came shortly after Tesla cut prices for its Model Y across Europe and both its Model Y and Model 3 in China.

Read more: Ford CEO, who has been concerned about Chinese EV dominance for years, says ‘the world has changed’ and he would work with rivals on a cheaper battery

Tesla warned in a call with investors last month of “significantly lower” sales growth this year after a disappointing fourth quarter. CEO Elon Musk said his EV maker is “between two big waves of growth.” Hoping to better compete with both Chinese rivals and cheaper gas-powered cars, Tesla plans to produce an entry-level EV starting at $25,000 next year.

Musk also keeps a close eye on BYD and other Chinese car manufacturers.

“If trade barriers aren’t put in place,” he told investors last month, “they will virtually wipe out most of the world’s other auto companies. They are very good.”

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