The car manufacturing industry cannot sustain the costs from government demands to shift to electric vehicles, warns head of Stellantis
The head of one of the biggest car making conglomerates in the world has issued a blunt warning about the industry costs associated with the move to electric vehicles (EVs).
Stellantis chief executive Carlos Tavares said that external pressure on car makers to accelerate the shift to electric vehicles potentially threatens jobs and vehicle quality, as manufacturers struggle to manage the higher costs of building EVs, Reuters reported.
Tavares made the comments during an interview at the Reuters Next conference.
It comes as many countries have placed looming bans on the sale of combustion engine cars. The UK for example has said that sales of new petrol and diesel powered cars and vans will be banned from 2030.
The European Union, California and other countries meanwhile have set goals to end sales of combustion vehicles by 2035 and beyond.
But pressure like this means that the costs are “beyond the limits” of what the car industry can sustain, Tavares was quoted as saying.
“What has been decided is to impose on the automotive industry electrification that brings 50 percent percent additional costs against a conventional vehicle,” he said.
“There is no way we can transfer 50 percent of additional costs to the final consumer because most parts of the middle class will not be able to pay,” warned Tavares.
Tavares said that car makers could charge higher prices and sell fewer cars, or accept lower profit margins.
Those paths both lead to cutbacks, he warned, and it comes as union leaders in Europe and North America have warned tens of thousands of jobs could be lost as a result.
Stellantis it should be remembered is a group formed by the merger of Fiat Chrysler and Groupe PSA. Its brands include Alfa Romeo, Chrysler, Citroën, Dodge, Fiat, Jeep, Opel, Peugeot and Vauxhall.
The group, like all other car manufacturers, has been feeling the impact of the chip shortage since February this year, when it announced it was suspending production at some of its plants in Europe, including Germany.
Aside from the chip shortage, the car industry is also contending with the regulatory demand for EVs.
But car manufacturers need time for testing and ensuring that new technology will work, Tavares also said this week.
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 percent productivity a year … in an industry which is used to delivering 2 to 3 percent 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.”
The cost of a typical electric car remains high at the moment, but experts predict costs will fall and analysts have reportedly projected that electric vehicles and combustion vehicles could reach cost parity during the second half of this decade.
The move towards electric vehicles is driven by government policies aimed at cutting greenhouse gas emissions.
However combustion engine cars are constantly improving their emissions, and these new rules tend to ignore the real emissions culprit found on every street, namely the typical home.
Another issue is that electric batteries are actually incredibly toxic as well, and have a finite lifespan, as short as 5 to 7 years – much shortly than the life of maintained combustion engineed car.
Tavares meanwhile said governments should shift the focus of climate policy toward cleaning up the energy sector and developing electric-vehicle charging infrastructure.
According to Reuters, 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.