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Electric cars cast growing shadow on profits

Ersin Çelik
09:57 - 2/10/2018 Tuesday
Update: 10:06 - 2/10/2018 Tuesday
REUTERS
Electric cars are poised to arrive en masse in European showrooms
Electric cars are poised to arrive en masse in European showrooms

Scale Effects

Carmakers are demanding increased public investment in recharging networks - which may yet awaken mass demand.

Economies of scale should also bring some relief. But lithium-ion batteries, which claim 40 percent of an electric car's value, face global cobalt and nickel shortages that will pull the other way, inflating costs as production volumes rise.

Perhaps more critically, generous government sales subsidies are unlikely to survive much growth. In markets where incentives have been dropped, electric car sales have fallen.

Renault is discounting its recently upgraded Zoe in the UK market with a 5,000 pound ($6,500) trade-in bonus, in addition to the government's 4,500 pound plug-in incentive.

French rival PSA will price its new rechargeable hybrids to match diesel leasing rates, programme director Olivier Salvat told reporters on a recent factory visit - adding that the carmaker aimed to avoid losing money on each vehicle sold.

"We don't launch vehicles with negative operating margins," Salvat said.

German luxury carmakers including Volkswagen Group, which includes Audi and Porsche, could put up with losses on electrified vehicles if it enables them to keep selling their biggest earners, upscale SUVs and large sedans.

That would leave mid-market competitors such as PSA and Renault, which can ill afford to sell large volumes of electric cars below cost, in a tougher bind.

"In electromobility you have to be a cost leader," BMW research and development chief Klaus Froehlich told Reuters.

"If you are not a cost leader you will not survive."

($1 = 0.7675 pounds)

#Electric cars
#Europe
#Mercedes
#Theresa May
#Volkswagen
#Daimler
#Renault
#Germany
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