A boost in demand for EVs is a double-edged sword for most manufacturers. As with Stellantis, it helps companies hit their zero-emission vehicle mandate targets in the UK and CO2 emissions goals in the EU, which reduces the chances of them having to paying costly fines. However, EVs remain costlier to build for most, with little way to claw back the difference without a complete redesign of the platform to reduce those costs.
For the Volkswagen Group, profit-margin parity with ICE cars won’t come until it launches the first EVs on the delayed Scalable Systems Platform (SSP), now due at the end of the decade.
“Until this platform arrives, we have to make trade-offs between BEV volumes and CO2 fines,” CFO Arno Antlitz told journalists and investors on its Q1 earnings call.
The Volkswagen Group isn’t yet compliant on CO2 and won’t be until after 2027, Antiliz said, resulting in annual fines of €400-500 million.
Legislation is running ahead of demand, the company argues, forcing manufacturers to lower pricing.
“We have to help these cars with prices that puts us into a situation that the margin is much lower than for combustion-engine cars,” Antlitz said.
Higher levels of natural demand gives car makers hope that they can ease off the discounting throttle and charge closer to the natural figure for EVs.
They can also lean on the UK government’s Electric Car Grant, which reduces prices by as much as £3750.
However, pricing pressure exerted by incoming Chinese brands as they try to gain market share is pushing the other way.
Car makers are uneasy about the most recent source of EV enthusiasm.
“I’m not sure I would necessarily pray to have ongoing high fuel prices, because it’s got bigger implications on the economy and everything else,” Ford UK boss Lisa Brankin said.
That’s already the case in the US, according to Volvo, which is seeing an overall hit in demand.