Electric cars – Tavares: “Factories at risk if prices don’t drop”

Carlos Tavaresmanaging director of Stellantisreturns to issue clear warnings on the social and industrial effects of electric mobility and on the need to reduce costs and prices to make accessible cars on tap to the general public. In particular, his automotive group and the entire four-wheeler sector could find themselves in the need to proceed with the closure of plants if they fail to make the purchase of EVs convenient, especially for the middle class. “A great challenge, if not the greatest, that we have in the electrification road map – reiterated Tavares, during his speech at CES in Las Vegas – is to develop a technology that has affordable costs for the middle class “. Otherwise, “in a few years we will find ourselves with products that cost much higher than conventional ones”, which would translate into more expensive vehicles that are difficult for consumers to buy. The sector would thus risk “losing the general public and the market would shrink significantly”, prompting manufacturers to make “unpopular choices” such as the closure of factories. After all, “if the market contracts, we don’t need so many plants” , warned the CEO.

Greater productivity. Stellantis has already been forced to make such a choice with the shutdown of the plant’s activities Belvedere, in Illinois, but the entire sector is at risk because similar closures “could happen anywhere as long as there is high inflation on variable costs”. Tavares then remarked how the only recipe to avoid the worst-case scenario is focused on a strong improvement in productivity, which compensates for electricity costs that are 40% higher than in traditional activities: “The automotive sector has no choice but to absorb the costs associated with technology”. Therefore, “absorbing the additional costs of electrification and safeguarding the accessibility of products for the general public is the main challenge of the automotive industry”.

The impact on the climate. “There is a need to focus on electrification, not only for a question of profitability, but for the planet”, continued the manager, once again underlining the need for strong growth in sales of electric vehicles to produce concrete effects against the climate change: “To have a significant impact, the sales volumes of low-emission vehicles must be large, otherwise with low volumes the impact is limited. Producing electric vehicles makes sense to help fight global warming if and only if the sales volumes are significant and can play a significant role in reducing emissions, but for the volumes to be high, the cost of the cars must be affordable”.

No cuts in sight. “If we don’t optimize the cost structure, we can’t absorb the additional costs of electrification. If we don’t absorb the costs, consumer prices go up and the market shrinks, and if that happens, fewer factories are needed. It’s a vicious circle. , a snake biting its own tail”, summed up Tavares, underlining that he has no announcement to make on possible job cuts, because “we have been working for years to keep businesses healthy and the best way to realize this it is looking at the financial results of the last ten years. However, it is clear that, in the automotive industry, if you stop working on costs, you will go from stars to rags, from ‘hero to zero’, in three years”.

Impossible help. On paper, government support would also be needed for the current transition phase, but there are several difficulties, starting with the precarious situation of public finances globally. “We can do our job and we try to do it to mitigate the cost so as to help consumers without putting society at risk, even when that means making unpopular choices,” she said. “I would like to see European governments supporting end consumers with subsidies that go directly into their pockets: it would be a great encouragement for the transition period from now to 2030”. However, “we know that governments will not be able to support significant subsidies because of the debt issue. This creates a stalemate”, particularly in Europe, where “the cost of debt is now higher than it was years ago due to rising interest rates, which means that countries will struggle to keep their finances in order and avoid further borrowing. This is the situation we face in Europe and it is even more acute and clear-cut in Italy”.

Italy issue. “The risk that must be avoided concerns the possibility of offering electric vehicles at a price that the middle class cannot afford, and this is exactly what I am trying to avoid”, underlined the number one of Stellantis, specifying that “this situation it is not specific to Italy, it is valid for all of Europe and above all for the countries of southern Europe, such as Italy, France, Spain, Portugal and Greece, which have to deal with a question of product accessibility”. On the other hand, according to Tavares, “the case of the Italian automotive market is very interesting because Italy has the largest B-segment in Europe. And this means that the question of affordable prices is very important at a time when we are all trying to reduce the cost of electrification”.