Stellantis CEO Carlos Tavares once again complains about the burden of electrification costs. Said that external pressure on automakers accelerate the shift to electric vehicle shift, but also threaten jobs and vehicle quality as producer struggle. Especially as the costs are rising to build EVs.
Governments and investors are all about speeding up the electric vehicle transition. But the costs are “beyond the limits” of what the auto industry can sustain according to Tavares. He talked about the challenges in an interview at the Reuters Next conference released on Wednesday. He said, “What has been decided is to impose on the automotive industry electrification that brings 50% additional costs against a conventional vehicle,” Further added, “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 do it the other way round. It involves leading to certain cutbacks. Various union leaders in Europe and North America have already warned about the jobs that could be lost.
Furthermore, Tavares talked about how automakers need time for testing and ensuring the new technology. Pushing to speed that process up “is just going to be counterproductive. It will lead to quality problems. It will lead to all sorts of problems,” he said.
Stellantis is aiming to avoid cuts by boosting productivity at a much faster pace than industry norms. He said, “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. The future will tell us who is going to be able to digest this, and who will fail. We are putting the industry on the limits. ”
Analysts project that EV costs will fall and that the battery vehicle and ICE vehicle could reach cost parity during the second half of this decade. The pressure with upcoming EV makers and the existing EV makers like Tesla is high for Stellantis. All the while traditional automakers are earning profits from current combustion vehicle sales. These EV makers are smaller compared to Stellantis which has various brands under its umbrella. However, investors are also shifting towards EV makers and those who make things happen. This is the result of government policies aimed at cutting greenhouse gas emissions. Tavares said governments should shift the focus of climate policy toward cleaning up the energy sector and developing electric-vehicle charging infrastructure.