Is Stellantis running scared from Tesla?
From the beginning of the electric vehicle era, the legacy automakers have deployed an ever-evolving repertoire of reasons why they can’t or shouldn’t sell EVs. “They aren’t practical.” “Consumers don’t want them.” “We can’t make a profit on them.” Each of these objections contained a kernel of truth, surrounded by a shell of negative thinking. Tesla has smashed them one by one.
Above: A look at the auto brands under the Stellantis umbrella (Source: Stellantis)
The latest proponent of automakers’ can’t-do attitude is Stellantis Chief Executive Carlos Tavares, who recently told Reuters that “external pressure” on automakers to accelerate the shift to EVs is a threat to jobs (cue the mobs with torches and pitchforks) and vehicle quality. The costs of the transition to EVs will be “beyond the limits” of what the auto industry can sustain, Tavares said in an interview at the recent Reuters Next conference.
“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.”
The only solutions Tavares seems to see are for automakers to charge higher prices or to accept lower profit margins—both of which risk job losses—or to boost productivity at an unprecedented pace. “Over the next five years we have to digest 10% productivity [increases per year]...in an industry which is used to delivering 2 to 3% productivity [improvement].” Who knew corporations were so averse to increasing productivity?
“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.” Well, he’s definitely right about that. Legacy automakers that fail to adapt to the new technology may well go belly-up. That’s what Volkswagen Group CEO Herbert Diess was driving at in October, when he pointed out to a group of top-level executives that Tesla can build a Model 3 in ten hours, more than three times as quickly as VW builds an ID.3 at its Zwickau EV plant.
Above: Stellantis CEO Carlos Tavares doesn't appear to be too enthusiastic about the transition to electric vehicles (Source: Reuters)
Mr. Tavares’s comments are clearly aimed at politicians—hence the mention of “the middle class” and the threat of job losses—specifically in Europe, where tightening emissions regulations are indeed putting pressure on automakers to electrify. But the real “external pressure” is coming from Tesla. The Californian upstart is outselling Stellantis and other brands in their home markets, and this trend will accelerate as the company leverages its massive market cap to build more factories.
With all due respect to Mr. Tavares, a respected industry veteran, it sounds like what he’s really saying here is that his company has no hope of competing with Tesla, and he wants governments to prop up an obsolete industry by relaxing emissions regulations and dropping proposals for future ICE bans.
Tavares does have some positive suggestions. He says governments should (as Reuters puts it) “shift the focus of climate policy” toward cleaning up the energy sector and developing charging infrastructure. (They should do both these things, while continuing to push for an end to ICE vehicle sales.)
On Tavares’s watch, Stellantis has beefed up its EV efforts, announcing 30 billion euros in new e-investment through 2025, which includes funds for new battery plants and sources of raw materials. This year, Jeep launched its first PHEV. More recently, Stellantis and Daimler made strategic investments in Factorial Energy, which is developing solid-state battery technology.
“We can invest more and go deeper in the value chain,” Tavares said. “There may be other (investments) in the near future.” We’d like to hear more of this kind of positive, future-oriented thinking, please, and less of the veiled appeals for government bailouts.