Electric cars cost 40 per cent more to manufacture than petrol vehicles – report

The rising cost of the precious minerals that go into electric-car battery packs are driving up prices, creating yet another speed bump on the road to price parity with petrol vehicles.

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Rising production costs continue to act as a roadblock to price parity between petrol and electric vehicles – and now one giant car has put a figure on the gap.

Carlos Tavares – the worldwide head of the giant Stellantis car group that includes Jeep, RAM, Alfa Romeo, Chrysler, Citroen, Opel and Peugeot – says technology “is 40 per cent more expensive” in electric vehicles.

The warning on the cost of manufacturing electric cars, reported by UK magazine Autocar, came as he cautioned about the potential threat to automakers and their existing factories that make petrol or diesel cars.

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Stellantis has already announced a decision to ‘idle’ – car industry shorthand for stopping production but not closing – its Belvedere factory in Illinois in the US where it builds the Jeep Cherokee, from next month (February 2023).

Mr Tavares said manufacturers must find a way to absorb the extra costs to make electric cars more affordable.

“Anywhere you introduce technology that is 40 per cent more expensive than the previous one, you need to work hard in improving your business model through fixed and variable costs,” Mr Tavares told Autocar magazine.

“There is no other option today other than absorbing the additional costs of electrification.”

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He also said the post-pandemic recovery would increase competition among carmakers, something already “very visible” in Europe, as well as putting more pressure on the price of electric vehicles.

“You lose pricing power because you rebalance supply and demand. Then you need to work faster on reducing costs to protect (profit) margins.

“If the average transaction price increases because of the (electric vehicle) sales mix increase, then you have risk that the total market shrinks.

“That means some unpopular decisions will need to be made. If you stop working on cost in this industry, you go from hero to zero in three years,” Mr Tavares told Autocar.

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Paul Gover has been a motoring journalist for more than 40 years, working on newspapers, magazines, websites, radio and television. A qualified general news journalist and sports reporter, his passion for motoring led him to Wheels, Motor, Car Australia, Which Car and Auto Action magazines. He is a champion racing driver as well as a World Car of the Year judge.

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