Volkswagen considers partnership to produce mass market electric vehicles

Volkswagen is considering partnering with other carmakers to produce cheaper electric vehicles to help it compete with a coming wave of lower-cost rivals from China.

The world’s second-largest carmaker plans to decide later this year how to produce an EV costing less than €25,000, chief executive Oliver Blume told a press conference in Berlin.

Chief financial officer Arno Antlitz said it was “so difficult to make money in such a segment”. VW was “considering co-operation” that would share costs by “hoisting the platform on more shoulders”, he said.

EVs in Europe tend to cost €15,000 more than their combustion engine equivalents and closing that gap is crucial to persuading consumers to switch and to competing with a wave of cheaper models from Chinese manufacturers expected in the coming years.

Very few EVs are available for under €30,000 in Europe and, despite their lower running costs, the high price tag is one reason sales growth of the cars is slowing in the region.

Blume has previously said that VW would not be able to produce a car priced at €20,000 until the end of the decade, underscoring the challenges for affordable mobility in Europe, as the bloc plans to phase out combustion-engine cars by 2035.

EVs are more expensive to make, with roughly 40 per cent of their cost made up by the battery, and most traditional carmakers still make the majority of their profits from cars with the older technology.

The European Commission is investigating whether Chinese carmakers receive domestic manufacturing subsidies that will allow them to undercut European prices on models exported to the region.

Most European carmakers already combine forces on van production and in the past some have joined forces to make smaller cars, a segment where it is harder to make money.

French carmaker Renault confirmed last month that it was in talks with VW about co-developing lower-cost EVs. Renault’s Dacia brand this week announced that its Spring budget EV, which is imported from China, would be sold for under £15,000 in the UK.

But to manufacture models in Europe for this price, the companies must look to cut costs further.

VW has previously said the ID2, its cheapest EV, would launch next year at a price from roughly €25,000.

BYD, the Warren Buffett-owned carmaker that last year overtook Tesla to become the world’s biggest seller of EVs, has ambitious plans for Europe, aiming to become one of the top three EV brands in the region by the end of the decade. Although its market share remains small, BYD aims to begin manufacturing EVs at a new plant in Hungary from the end of next year.

VW’s confirmation of possible partnership talks came as it said that it expected sales growth to slow to 5 per cent this year, from 15 per cent in 2023. It said on Wednesday that EV sales in 2023 made up 8.3 per cent of its total, amid cooling demand in recent months.

It was essential for carmakers to pool spending “in a ‘band of brothers’ manner” to cut the costs of vehicles, said Matthias Schmidt, an independent auto analyst.

“Higher tariffs imposed by the EU on Chinese imports may also give the industry breathing room, however the industry is likely to remain reliant on the strength of its brands to offset higher prices [than] Chinese models,” he added.