#DevelopmentCosts

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.”