How the MG4 undercuts VW, Peugeot rivals on price

The MG4 electric compact hatchback is a competent car but in one area it is groundbreaking: its price.

Deliveries have already started in Europe for the China-built model, which MG expects to be its top-seller next year in the UK, the brand's biggest market in the region.

In Germany, the entry MG4 with a 51-kilowatt-hour battery and a 350 km (218 miles) range starts at 28,240 euros ($28,220).

By contrast, the Volkswagen ID3, the car the MG4 was benchmarked against, starts at 38,060 euros for the current base variant with a 58-kWh battery and range of 426 km (an entry version with a 45-kWh has been promised but is not yet on sale).

Meanwhile the Peugeot e-208, which is smaller than the MG4, starts at 35,350 euros in Germany for its base version with a 50-kWh battery and 362 km of range.

So, how can the MG4 be sold for 7,000 to nearly 10,000 euros less than its direct rivals? A key question to address is profit margin. Is MG willing to lose money to build share during its growth phase?

The SAIC-owned brand said that isn't the case. It claims that it makes a profit at that price, despite clearly chasing market share at a time when rivals are more supply constrained.

"We price to achieve a margin that we are comfortable with and that gives us enough traction to meet sales targets," UK Commercial Director Guy Pigounakis, told Automotive News Europe.

Assuming MG and SAIC aren't selling at a loss to grow share, one key to keeping the price down is the battery. Both the 51-kWh pack and the larger 62-kWh version use lithium iron phosphate (LFP) batteries supplied by CATL.

This provides a cost advantage compared with rivals that use the more expensive nickel-manganese-cobalt (NMC) battery chemistry.

A recent teardown of CATL's LFP battery use in Shanghai-built versions of the Tesla Model 3 overseen by analysts from UBS bank revealed that the CATL solution was the global battery cost leader $131 per kWh, ahead of BYD's Blade LFP battery at $134 per kWh.

UBS calculated that using LFP provides a 9 percent cost saving compared to a NMC cell.

Another way MG cut cost was by eliminating one layer of packaging by deploying a form of battery manufacturing called cell-to-pack. The technique reduces cost and minimizes the thickness of the layer to just 110 mm. That is slimmer than the 140 mm thickness that VW claims for its MEB electric platform.

Modular platform

The MG4 is the first SAIC model to use the company's new modular scalable platform (MSP) that it says will underpin a range of models, similar to how MEB already underpins several VW Group electric cars.

MG points to the cost savings a common platform brings, compared with current EV models. For example, the ZS EV small SUV is built on a converted combustion engine platform and is mainly now sold in Europe with China sales winding down.

"The MG4 is global car, that brings us huge economies of scale," Pigounakis said.

Cars using the MSP platform can also be configured to swap their batteries. So far, this option is not being offered to European models, Pigounakis said, citing lack of demand.

The other cost savings are more familiar. The entry MG4 SE model, for example, doesn't come with a navigation system, saving on mapping license fees, with customers instead expected to use their smartphones mirrored to the car's 10.25-inch touchscreen via Apply CarPlay or Android Auto.

In a move familiar to owners of electric VWs, many of the dashboard buttons such as those for the heating and ventilation have moved to the screen. Some of the plastics used in the cabin are obviously on the cheaper end.

However, the entry car isn't badly equipped, coming with adaptive cruise control and lane-keeping assistant as standard (albeit the latter feature can have some aggressive tendencies) as well as second 7-inch screen in front of the driver. The MG4 also has a reasonably powerful, 168 hp, electric motor the helps the car go 0 to 60 mph (about 97 kph) in 7.5 seconds. A dual-motor, all-wheel-drive variant of the MG4 is planned.

If MG can sustain this price advantage as well as extend it to new models on the dedicated EV platform, competitors might be forced to reappraise their own cost targets for their upcoming EVs.