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The transition to electric vehicles (EVs) is expected to impose a “significant burden” on auto suppliers, according to Stellantis CEO Carlos Tavares. Speaking on Wednesday at the Bernstein Strategic Decisions conference, Tavares emphasized the intense competition among Western automakers to cut costs and stay competitive with Chinese peers. This transition is not just about technological advancements but also involves a complex web of economic and logistical challenges that must be addressed.
Cost Challenges in EV Production
One of the primary challenges Tavares highlighted is the significant cost disparity between producing EVs and traditional petrol models. He pointed out that EV production costs are 40% to 50% higher, forcing automakers to implement stringent cost-cutting measures across all levels of their operations. This includes everything from supply chains to logistics, compelling a reevaluation of sourcing strategies. Tavares remarked, “You are going to see a huge shift of the supplier base. The sourcing will move from the Western world to the best cost countries.” This shift underscores the need for automakers to find cost-effective solutions to remain competitive in the rapidly evolving automotive landscape.
Affordability and Government Support
Affordability remains a significant barrier to the widespread adoption of EVs. Tavares noted that consumers are hesitant to buy expensive EVs without substantial government incentives. He explained, “The Western world consumer is telling the Western world government, okay, there is the global warming issue, fine, but if you don’t help me, I will not help you.” This sentiment reflects the broader market reluctance to transition to EVs without financial support, highlighting the crucial role of government policies in accelerating EV adoption.
Multi-Energy Platforms for Flexibility
To navigate the uncertainty and challenges associated with the EV transition, Stellantis plans to continue investing in multi-energy platforms. These platforms, designed for EVs but capable of supporting hybrid electric-petrol vehicles, provide the necessary flexibility to adapt to varying market demands. “Today multi-energy is good to face uncertainty,” Tavares explained. This approach allows Stellantis to maintain versatility in its product offerings, ensuring that they can meet consumer needs while gradually transitioning to fully electric models.
Affordable EV Models on the Horizon
In a bid to make EVs more accessible to a broader audience, Stellantis is set to launch several affordable models. One notable release is a new Jeep model in the U.S., priced under $25,000. This follows the introduction of the €20,000 ($21,600) Citroen e-C3 EV in Europe. Additionally, Stellantis’s joint venture with Leapmotor will facilitate the availability of the T03 model in Europe for less than €20,000. These initiatives are part of Stellantis’s broader strategy to make EVs more affordable and appealing to a wider range of consumers.
Focus on Business Strength and M&A Opportunities
When asked about potential mergers and acquisitions, Tavares emphasized that maintaining Stellantis’s robust business position is his primary goal. He stated, “If an opportunity comes, we will of course consider it, but we have to be fit at the moment where that opportunity is passing by.” This cautious yet opportunistic approach reflects Stellantis’s strategy of ensuring strong business fundamentals while remaining open to strategic opportunities that may arise..
