PSA Head Says Electric Vehicles Too Dang Expensive to Build

Matt Posky
by Matt Posky
psa head says electric vehicles too dang expensive to build

Carlos Tavares, CEO of Groupe PSA, believes the secret to mainstreaming electric vehicles may have something to do with the industry being able to sell them at a profit. The French automaker’s boss has expressed concerns about a segment that’s almost entirely propped up by taxpayers — sounds likes someone might have taken a business course before running a multinational automaker!

It’s not that EVs are bad; they’re just too novel to be a bargain. Tavares believes the high development costs associated with newer technologies have effectively made electric cars money-losers without financial assistance from the government. He thinks their ultimate success (or failure) hinges upon finding a way to make them profitable without being perpetually subsidized by the government while reducing the amount of raw materials required for battery manufacture. As a bonus, he hinted that automakers might have juicer R&D budgets if they prioritized spending — hopefully accelerating the process of making EVs a little easier on everyone’s bank account.

“Affordability will be the challenge for the next five years in terms of costs,” Tavares told the Financial Times this week. “Those breakthroughs need to come from real estate, distribution costs, sourcing all the components of cost structure will have to be combined to bring this affordability.”

From FT:

Carmakers and consumers in the EU benefit from about €12,000 in subsidies for each electric car through incentives and other measures, he said.

“This is the gap that we need to close if we want to offer this to the biggest possible number of citizens, which means all sorts of cost reduction needs to be addressed to face this challenge,” Mr Tavares said.

PSA, which moved its headquarters from the Champs-Elysées to the outskirts of Paris to save money several years ago, intends to make even more radical moves by scaling back an office network vacated during the pandemic as staff worked from home.

This is something we’re seeing across the globe. Now that pandemic lockdowns have proven swaths of employees can work remotely, employers are beginning to wonder why they’re paying for spaces to house them during the day.

“We are going to shrink our real estate footprint,” Tavares explained. “This will represent a benefit for employees. They will spend less money on transportation to go back and forth, and will have a better work-life balance.”

While PSA intends to retain locations for teams to meet in a physical space when necessary, the current plan is to scale back wherever possible and adopt a shared-space model for employees who can’t stay home forever. While some studies claim this increases burnout rates (as staff often find it difficult to decouple from working), increased risk of depression, and overall losses in workplace synergy, it’s often cheaper to deal with minor consequences and not to pay for another cubicle.

Whether the cons of working remotely outweighs the pros probably has a lot to do with the job in question and how its handled by the company. The only thing that seems crystal clear is the opportunity for savings, which PSA seems to know a thing or two about. It was one of the few manufactures that went through the first half of 2020 and still managed to turn a profit — banking €595 million while the rest of the industry languished.

Those funds will be recirculated into its EV development program. Even though Tavares seems skeptical of battery-driven automobiles’ ability to thrive independent of government assistance, they’re also forcing the issue. Automakers hoping to sell in places like Europe and China are effectively forced into bending over backwards to comps with emission rules or be fined out of existence. That’s one reason why you’re seeing so much talk about electric cars of late, as well as examples that were rushed out the door before the were ready — it’s the only way many brands can meet the European threshold of 95 grams of carbon-dioxide per kilometer that’s coming in 2021.

This is also why we’ve seen so many sizable crossovers previewed as BEVs of late. Their heft makes for a terribly energy-inefficient product, but their lack of a tailpipe makes them exempt from stringent environmental mandates that rarely bother to consider where the electricity comes from. Making SUVs rely on battery power might be the only way to continue selling them. The bigger issue, however, remains in finding a way to make EVs profitable without government help in the short term. Even Tesla owes a substantial amount of its current profitability to selling off carbon credits to automakers building internal combustion models, and it’s the gold standard for how to run an electric vehicle firm.

[Image: Frederic Legrand COMEO/Shutterstock]

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  • Mcs Mcs on Jul 29, 2020

    "Even Tesla owes a substantial amount of its current profitability to selling off carbon credits to automakers building internal combustion models, and it’s the gold standard for how to run an electric vehicle firm." Tesla does make a profit on each car they make without government subsidy. They still have a lot of expenses unrelated to the profitability of the cars like building 2 massive factories simultaneously, expanding a third, moving into the battery cell manufacturing business, growing their power distribution business, and getting their biotech manufacturing business started. At least two more vehicles on the way, the van and the little hatchback. It takes money to grow a business. Especially when they seem to be moving well beyond the auto business.

    • See 4 previous
    • Vulpine Vulpine on Jul 30, 2020

      @Matt51: I disagree. Oh, I accept that those credits are used for that purpose but I don't agree that those credits are the ONLY reason they're showing profits.

  • Vulpine Vulpine on Jul 30, 2020

    Sounds to me like Stellaris needs to consider Elon Musk's offering, at least for the short term. Start with a known drivetrain and simply add your own chassis and body. Use the extra time gained to develop your own drivetrain and migrate it in, gradually weaning yourself off of that partnership. Either that, or simply keep the partnership in much the way FCA attempted to do with GM so that the sharing can benefit both brands.

  • EBFlex Such insane demand for government cars yet companies are laying people off and others are losing billions upon billions. Crazy
  • Chuck Norton I don't see anything wrong with the name. It's an impressive little motor-and despite the fact that it has been hammered on every vehicle forum-including this one it seems to be gaining market acceptance.
  • Spookiness Other non-US markets get the Forte5 "liftback" version of this. That would be a perfect size for me and I'd consider it if it were available. I think they're good looking and good value.
  • 28-Cars-Later We have arrived.
  • MrIcky Unimogs