Tesla's Robotaxi Lands in Paris—But Europe's Real Fight Is Over Cheap EVs

Key Points

• Tesla unveiled its Cybercab robotaxi in Europe at the Paris Motor Show while emphasizing its Full Self-Driving technology amid unresolved European regulatory approval.
• Stellantis, Renault's Dacia brand, and Chinese makers like BYD showcased competing strategies emphasizing affordability, local production incentives, and low-cost EV models.
• Investors should watch European incentive policies tied to vehicle manufacturing location and Tesla's upcoming Q3 earnings report for updates on FSD approval progress.

Tesla Inc. NASDAQ: TSLA is sure to generate headlines at the Paris Motor Show as the electric vehicle (EV) giant unveils its Cybercab robotaxi in Europe for the first time.

Looking a bit closer at Europe's largest automotive stage, however, investors may find that the bigger story is about affordable EVs overall, with numerous competitors showing off their latest models.

Stellantis N.V. NYSE: STLA, for example, returns to the show with more than 60 vehicles across eight brands, while local Renault Group OTCMKTS: RNLSY will show a Dacia Spring that was built in Europe and designed to meet local incentives. Chinese competitors will also be in attendance in a bid to broaden their intercontinental appeal.

The contrast between these offerings highlights some of the different strategies companies are attempting to win Europe's coveted EV market—from autonomous driving tech to low-cost alternatives that take advantage of local opportunities.

Tesla Makes a Big Bet on Autonomous Driving

Tesla is offering test drives on multiple vehicles equipped with the company's Full Self-Driving (FSD) system (though not in the Cybercab), a clear choice by the company to emphasize what it sees as a technological advantage. The company may be emphasizing this in addition to—or in place of—vehicle pricing and specs.

However, a critical factor for Tesla will be European regulations surrounding autonomous driving, which continue to evolve. This may be why the company is also focusing on its FSD Supervised, the driver-assistance tech, at the auto show. The vehicle authority of the Netherlands granted certain approval for FSD Supervised earlier this year, although it is not yet approved across all of Europe.

Nonetheless, approval for a driver-assistance platform is very different from that for a fully self-driving system, leaving Tesla still needing to convince European regulators of the safety and viability of its goal. One of the company's latest bids to do so is to drop the FSD name entirely in favor of "Assisted Driving."

Stellantis Attempts to Win Back European Buyers

European firm Stellantis has a new leader in CEO Antonio Filosa, as well as a renewed emphasis on its extensive portfolio of brands and a push to connect with European customers once again. Its display in Paris includes vehicles ranging from Fiat and Opel to Peugeot, Alfa Romeo, and Citroën, plus new products and concepts that aim to show how the company is transforming traditional brands into EV competitors.

The scale of Stellantis' display suggests the company is going all-out in an effort to rebuild momentum among European customers as it faces increased pressure in the market from Chinese EV makers and the cost of transitioning its many vehicles to EV.

To be successful at the transition, Stellantis will need to make electrification accessible for European customers without losing the perception of quality long associated with its brands. The company will need to turn its product launches into sales while also keeping an eye on margins.

A Lesser-Known Brand With Affordability Appeal

Renault's Dacia brand is offering a redesigned Spring electric city car at the show, another way of responding to the affordability challenge impacting all EV makers.

This model is produced in Europe—the previous version was built in China—thereby helping it meet European incentives favoring domestically made vehicles.

Taking advantage of local incentives like this can help Renault to keep the purchase price of Springs down without forcing the company to eat some of those costs itself. Incentives can play a massive role for buyers as well. Renault is banking on pricing and production decisions to make the math work, rather than leaning on brand recognition like Stellantis.

Chinese Competitors Bring Low-Cost Options

Chinese makers like BYD—trading over the counter in the United States as BYD OTCMKTS: BYDDY—are pressuring European rivals with low-cost EVs, including some new products unveiled at the show in Paris.

BYD presents the Atto 8, a seven-seat electric SUV that the company claims can charge from 10% battery to 97% in nine minutes under optimal conditions.

EV makers in China have sought to corner the market for entry-level pricing on EVs, but the Paris show may reveal competition at other pricing levels as well.

The show could also be an opportunity to highlight AI tools and autonomous driving tech these companies have developed.

What to Watch Going Forward

Investors should keep an eye on how European governments change the battlefield for EV makers with incentives linked to where cars are built, helping to potentially narrow the price gap between European-made EVs and imported rivals. Programs and requirements differ by country, though, so it's a complex system that may not yield clear winners.

For Tesla, a major catalyst will be its Q3 earnings report in the week following the Paris show, where investors will watch for updates on cash generation, capital spend, margins, and more. Of course, any progress on FSD approval will likely draw attention as well.