EV costs driving small automakers to bigger rivals

The high cost of electric vehicles is driving small automakers into the arms of the big boys.

With demand for EVs low, manufacturers like Subaru, Mazda and Honda are pairing with larger, more capitalized rivals Toyota and General Motors. The alliances enable smaller producers to meet government electric vehicle regulations and get their feet wet in the EV market without making massive expenditures.

Subaru, for example, will make its first electric SUV, the Solterra, in tandem with a similar Toyota model. Subaru announced last week that the 2023 model will go on sale next year. Only luxury brand Tesla has sold EVs in significant numbers, and most battery-powered vehicles in the pipeline are upscale vehicles.

Electrified vehicles have gotten little traction with Subaru’s off-road, priceconscious customer base, but the company, like its peers, is facing escalating government fines if they don’t make them. After years of dictating mpg numbers to automakers, governments from California to Europe are now mandating what drivetrains automakers use.

“The challenge is cost and range for any company trying electrification,” said Michael Reddick, car-line planner for the Subaru Forester SUV,

WRX sedan, and BRZ sportscar models, in an interview. “We’re working through packaging costs and packaging constraints. Whatever (our EV model) is, it will be a Subaru first. It will be able to make it to the trail; it will be able to be used for outdoor adventure.”

Though its core northwest America demographic is environmentally conscious, Subaru has only brought to market one electrified vehicle, the Crosstrek SUV plug-in hybrid. With 17 miles of range before its gas engine kicks in, the hybrid’s $36,395 sticker price is well above a comparably-equipped, $29,045, gaspowered Crosstrek — a tough ask for Subaru’s price-aware customers.

Pairing with Toyota helps Subaru mitigate cost. Other industry players like Mazda (also partnered with Toyota) and Honda (GM) are forming Big Auto partnerships.

“Automakers don’t see a lot of volume in EVs in the next several years,” said auto consultant and former Wall Street analyst Joe Phillippi of AutoTrends Consulting. “Not until you can fill an entire auto plant with EV production, then it becomes economical. So the smaller guys have to partner with someone over time.”

He said the partner relationship is symbiotic.

“Toyota has made tremendous investments in electrification in the last 20 years. So the partnership helps the big guys, too,” continued Phillippi.