De Meo: ‘European manufacturers must avoid price wars’

Tesla caused a price war in China at the end of last year and again this year it has lowered prices several times to boost sales. European car manufacturers would do well to ignore this, says Renault CEO Luca de Meo in an interview with Bloomberg during the IAA: “It is important to avoid a price war in the short term,” said De Meo, who warned that European car manufacturers in particular are coming under pressure from price cuts by the American Tesla and Chinese car manufacturers. Moreover, there is an important downside to price reductions, because they reduce profit margins. For example, Tesla saw its profit margin fall to the lowest level in four years in the second quarter.

Although the European car market is “quite weak at the moment”, according to De Meo, Renault’s plans to unveil a new product every month next year should help the company weather the difficult market conditions. Renault also still plans to split off the part that makes electric vehicles from the branch that focuses on cars with conventional fuel engines. That part will be floated separately next year under the name Ampere. Renault hopes this move will reduce the cost of electric cars over time. This should contribute to a stronger market position compared to Tesla and the many Chinese newcomers.

Pictured: A preview illustration of the upcoming electric Renault 5.