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Stellantis CEO says EV cost burden is 'beyond the limits' for automakers

EconomyDec 01, 2021 12:42PM ET
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© Reuters. FILE PHOTO: Carlos Tavares, Chief Executive Officer and Chairman of the Managing Board of PSA Group, attends the Tomorrow In Motion event on the eve of press day at the Paris Auto Show, in Paris, France, October 1, 2018. REUTERS/Regis Duvignau//File Photo

By Joseph White

DETROIT (Reuters) - Stellantis NV Chief Executive Carlos Tavares said external pressure on automakers to accelerate the shift to electric vehicles potentially threatens jobs and vehicle quality as producers struggle to manage the higher costs of building EVs.

Governments and investors want car manufacturers to speed up the transition to electric vehicles, but the costs are "beyond the limits" of what the auto industry can sustain, Tavares said in an interview at the Reuters Next conference released Wednesday.

"What has been decided is to impose on the automotive industry electrification that brings 50% additional costs against a conventional vehicle," he said.

"There is no way we can transfer 50% of additional costs to the final consumer because most parts of the middle class will not be able to pay."

Automakers could charge higher prices and sell fewer cars, or accept lower profit margins, Tavares said. Those paths both lead to cutbacks. Union leaders in Europe https://www.reuters.com/world/europe/transition-electric-cars-threatens-60000-jobs-italy-fim-cisl-union-2021-11-19 and North America https://www.reuters.com/business/autos-transportation/united-auto-workers-presses-gm-ford-unionizing-battery-plants-2021-04-28 have warned tens of thousands of jobs could be lost.

Automakers need time for testing and ensuring that new technology will work, Tavares said. Pushing to speed that process up "is just going to be counter productive. It will lead to quality problems. It will lead to all sorts of problems," he said.

Tavares said Stellantis is aiming to avoid cuts by boosting productivity at a pace far faster than industry norm.

"Over the next five years we have to digest 10% productivity a year ... in an industry which is used to delivering 2 to 3% productivity" improvement, he said.

"The future will tell us who is going to be able to digest this, and who will fail," Tavares said. "We are putting the industry on the limits."

Electric vehicle costs are expected to fall, and analysts project that battery electric vehicles and combustion vehicles could reach cost parity during the second half of this decade.

Like other automakers that earn profits from combustion vehicles, Stellantis is under pressure from electric vehicle maker Tesla (NASDAQ:TSLA) Inc and other pure electric vehicle startups such as Rivian.

The electric vehicle companies are far smaller in terms of vehicle sales and employment. But investors have given Tesla and Rivian higher market valuations than the owner of the Jeep SUV brand or the highly profitable Ram pickup truck franchise.

That investor pressure is compounded by government policies aimed at cutting greenhouse gas emissions. The European Union, California and other jurisdictions have set goals to end sales of combustion vehicles by 2035. The United Kingdom has set 2030 as the deadline for going all-electric.

Tavares said governments should shift the focus of climate policy toward cleaning up the energy sector and developing electric-vehicle charging infrastructure.

Stellantis, created in 2021 with the merger of French automaker Peugeot SA (PA:PEUP) and Italian-American automaker Fiat Chrysler NV, is on track to deliver 5 billion euros in cost reduction through streamlining its operations, Tavares said.

Tavares has accelerated Stellantis' electric vehicle development, committing 30 billion euros through 2025 to developing new electric vehicle architectures, building battery plants and investing in raw materials and new technology.

On Tuesday, Stellantis said it had invested in solid-state battery startup Factorial alongside German automaker Daimler AG (DE:DAIGn).

"We can invest more and go deeper in the value chain," Tavares said. "There may be other (investments) in the near future."

To watch the Reuters Next conference please register here https://reutersevents.com/events/next/

Stellantis CEO says EV cost burden is 'beyond the limits' for automakers
 

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Comments (4)
Joao Abo-gaux
Joao Abo-gaux Dec 03, 2021 12:03AM ET
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It’s all a scam…. Humans cant avoid global warming and what not by doing so… battery production and disposal is highly pollutant and this is way worse than the “green” they are trying to sell to you
Ron Love
Ron Love Dec 01, 2021 1:33PM ET
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Tesla bulls have been saying for years that OEMs will mostly all go bankrupt by 2030. Making EVs isn’t the same as making ICE cars.
rizwan aslam
rizwan aslam Dec 01, 2021 12:50PM ET
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Ev not for me. I like speed
Barak David
Barak David Dec 01, 2021 8:21AM ET
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you dont have to make the transition if you dont want to.. just dont come asking for another bailout.. just enjoy your time selling ICE cars, and file for bankruptcy in next decade
 
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