Stellantis, the world’s fourth biggest car-maker, says that if EVs don’t get more affordable, the entire car industry is “doomed”.

In an interview with Automotive News Europe (ANE) this week, Stellantis’ chief manufacturing officer, Arnaud Deboeuf, said the company was aiming to cut the cost of building EVs by 40 per cent by 2030.

To achieve this, Stellantis plans to make some parts inhouse and is pressuring suppliers to cut the price of other components.

“It’s a big challenge,” Mr Deboeuf said.

Stellantis plans to introduce more than 75 all-electric models this decade and transform at least some of its French car plants to make EVs, ANE reported.

At the same time, Stellantis’ strategy is to maintain strong returns by relying on extra revenue from its more profitable premium vehicles, as well as software and services.

The dream of EV prices dropping as production volumes rise appears to be evaporating as rising raw-materials costs are rendering some battery-powered models unprofitable.

In fact, EV prices are increasing as manufacturers deal with rising costs in raw materials as demand for rare materials rises. 

Production costs are ballooning as factories swing over to building unfamiliar new-tech vehicles and car-makers are facing increasing costs from rising interest rates attached to debt incurred through building and equipping new factories.

CEO Carlos Tavares said that while Stellantis will comply with the European Union’s decision to eliminate carbon emissions from new cars by 2035, he believed policy makers appeared to “not care” whether car-makers have enough raw materials to underpin the shift.

As it faces the challenge, Stellantis is also bringing more EV development in-house, with five large battery factories planned across North America and Europe, which will produce 400 gigawatt-hours of cells by 2030. 

Mr Tavares said the firm won’t rule out buying a mine to secure raw-material supplies.

Mr Tavares said that greater demand for EV batteries between 2024 and 2027 – a period before more European capacity is due to come online – would benefit Asian producers and “put at risk” cell output in the West.

Meanwhile, Ford chief financial officer John Lawler, speaking at an investor conference earlier this month, said that the cost of producing the all-electric Ford Mustang Mach-E had increased substantially because of sharply higher battery-material costs.

He said that while the Mach-E was profitable when it was launched in late 2020, “that’s no longer true.”

Tesla raised prices as much as $A3950 in Australia and $US6000 ($A8340) per car in the US this month, following similar hikes earlier this year in the US from Rivian, Hummer and Ford. 

The EV push has also been held back in the UK by the Brexit trade pact that London signed with Brussels in 2021. This sets limits on the proportion of EV components that can be made outside of Europe for manufacturers to benefit from tariff-free trade.

These limits will fall from 60 per cent initially to 45 per cent by 2027. Unless manufacturers comply with these limits, their cars could become prohibitively expensive and the investment simply won’t pay off for manufacturers.

Britain might be out of the EU, but it can’t escape this crucial trading relationship. 

European countries remain the biggest market for British automotive manufacturers, and 55 per cent of cars made in the UK end up being exported to the EU.

One company combatting foreseeable price rises is Mercedes-Benz – it is investing more than $A3 billion in its European production sites as part of its 2022-2026 business plan.

Part of that investment will be to bring in-house the production and development of the Stuttgart-based brand’s electric-drive technology, including the manufacture and assembly of high-performance electric motors from the acquired British specialist Yasa.

By Neil Dowling