Stellantis CEO says EV cost burden is ‘off limits’ for automakers

DETROIT, Dec. 1 (Reuters) – Stellantis NV (STLA.MI) CEO Carlos Tavares said external pressure on automakers to speed up the switch to electric vehicles is likely to threaten jobs and vehicle quality as producers struggle to manage the high costs of building electric vehicles.

Governments and investors want auto manufacturers to speed up the transition to electric vehicles, Tavares said in an interview at the upcoming Reuters conference released on Wednesday, but the costs are “exceeding the limits” of what the auto industry can afford.

“What has been decided is to impose electrification of the automobile industry which brings in 50% additional costs compared to conventional cars,” he said.

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

Tavares said automakers could charge higher prices, sell fewer cars or accept lower profit margins. Both paths lead to the cuts. Union leaders in Europe And North Amarica They warned of the loss of tens of thousands of jobs.

Tavares said automakers need time to test and make sure the new technology will work. Pushing to speed up this process, he said, “will be counterproductive. It will lead to quality problems. It will lead to all kinds of problems.”

Tavares said Stellantis aims to avoid cutbacks by increasing productivity much faster than industry standards.

“Over the next five years, we have to digest 10% productivity per year…in an industry used to improve productivity by 2 to 3%,” he said.

“The future will tell us who will be able to absorb this and who will fail,” Tavares said. “We’re setting the industry in bounds.”

Carlos Tavares, CEO and Chairman of the PSA Group, attends the Tomorrow In Motion event on the eve of the press day at the Paris Motor Show, in Paris, France, October 1, 2018. REUTERS/Regis Duvignau // File Photo

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

Like other automakers that make profits from combustion cars, Stellantis is under pressure from electric car maker Tesla Inc. (TSLA.O) And other startups in the field of pure electric cars such as Rivian (Rivno).

Electric vehicle companies are much smaller in terms of vehicle sales and employment. But investors gave Tesla and Rivian higher market ratings than the owner of the Jeep SUV brand or the highly lucrative Ram pickup franchise.

This investor pressure is exacerbated by government policies aimed at reducing greenhouse gas emissions. The European Union, California and other jurisdictions have set targets to end sales of combustion vehicles by 2035. The UK has set 2030 as the deadline to transition to all-electric vehicles.

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

Tavares said Stellantis, which was set up in 2021 with the merger of French carmaker Peugeot SA and Italian-American automaker Fiat Chrysler NV, is on track to deliver €5 billion in cost reductions by streamlining its operations.

Tavares has accelerated the development of electric vehicles for Stellantis, allocating €30 billion through 2025 to develop new electric vehicle bodies, build battery plants, and invest in raw materials and new technology.

Stellantis said on Tuesday it had invested in Startup Factorial solid battery company along with German carmaker Daimler AG. (DAIGn.DE).

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

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reporting by Joe White; Editing by Cynthia Osterman

Our criteria: Thomson Reuters Trust Principles.

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