Home & Leisure

Stellantis CEO: Companies losing money on EVs may only have until 2030

Breana Noble, The Detroit News on

Published in Automotive News

The CEO of the maker of Chrysler, Dodge, Jeep, Ram and other vehicles said on Wednesday he expects before the end of the decade that automakers could start to drop out of the market because of the electrification transition.

The competitors in the best position to survive that, Stellantis NV's Carlos Tavares contends, are the legacy companies whose gas- and diesel-powered vehicles are charging that move to electric vehicles and other alternative fuel technologies. Tavares frequently has dubbed this era as "Darwinian" where only the fittest will

"What we believe is that the guys who are using what we would call as a shortcut, the legacy business, to fund the future are going to be the guys who are going to be in the best position to accommodate to those different scenarios, because basically, we are doing very good money with the legacy business," Tavares said during a fireside chat at Goldman Sachs' 15th Annual Industrials and Autos Week. "Already, (there is) significant money with the EV business, but there is still a lot of uncertainty out there."

Two events next year are driving that unstable outlook: the U.S. presidential election and the European parliament election, Tavares said. The results could have substantial implications for how quickly consumers adopt EVs.

The Biden administration has proposed ambitious fuel-economy standards that would nearly halve fleet fuel consumption by 2035. If former President Donald Trump or another Republican candidate wins, though, those targets could be rolled back.

Depending on those results, there could be more bumps to making that turn to EVs. The fewer the obstacles, the sooner automakers that aren't making money on EVs could be in danger, Tavares said, putting out an estimate of two to three years before they begin collapsing. It could be closer to five or six year, though, the more veering EV growth experiences.

"If it's purely linear, with the amount of capital that you need to fund for products, which structurally are less profitable than the ICEs, they are going to put themselves in trouble quite quickly," Tavares said. "And in that case, a shorter period of time for them."

In the United States and in Europe, Stellantis' electrified vehicles are in the black, he said. The automaker previously said 2026 is when it expects cost parity between producing an EV and internal combustion engine vehicle. That's happening faster in Europe than in the United States, because Stellantis only is just beginning to launch all-electric vehicle here.

Profit has to be made on a $25,000 car, Tavares said, or else a company will be in trouble by excluding middle-class buyers. In Europe, the new ë-C3 from French brand Citroën is priced at just over $25,100 (23,300 euro) and is profitable.


"Because we see that the offensive on BEVs can be Tesla in the U.S., can be the Chinese in Europe is going to put a lot of pressure on pricing on MSRPs," he said. "So, if you want to have good margins in terms of EVs, you have to be super sharp on cost, because if you want to attract the middle classes, you need to have pricing at the core of the market that makes you profitable. So, how to get a profitable pricing at the core of the market is an equation that you can only solve if you reduce cost, and this is what we are reasonably good."

Stellantis last month announced a second round of voluntary severance incentives this year for U.S. salaried workers. Its new contract with the United Auto Workers also makes available a $50,000 buyout package for retirement-eligible employees next year and in 2026.

He also cited in the offensive Stellantis' investment in and export distribution joint-venture with Chinese EV maker Zhejiang Leapmotor Technologies Ltd. The company has a 30% lower starting point in supply costs than anything in the Western world, Tavares said.

Despite the regulatory uncertainty around EVs, Tavares said the ultimate destination to electrification isn't changing. That makes the challenge ensuring the company doesn't have too much empty capacity, which has prompted announcements by automakers in recent weeks to pullback on EV investments and delay launches. Tavares said Stellantis is prepared for a steep ramp up through 2027 or '28, and based on the elections, will decide when to invest more.

That being said, Tavares said the automaker remains "on track" when it comes to its Dare Forward 2030 strategy that calls for $323 billion (300 billion euro) in annual revenue by the end of the decade. That plan forecasted 50% of U.S. sales and 100% in Europe would be all-electric.

Although Stellantis has posted the best profit margins in the industry at 14.4% in the first half of the year, Tavares described 2023 as "not so good" with the company "very far from operational excellence." He cited weaknesses in outbound logistics such as the delivery time of sold vehicles in Europe to customers, sales and marketing, and pure supply.

Chief Financial Officer Natalie Knight added that the second half of the year typically is weaker in profitability and free cash flow. In October, she also had noted that the UAW's 44-day strike cost it less than $800 million (750 million euro) in net income this fall.

Ford Motor Co. said it lost $1.7 billion over its 41-day strike. At General Motors Co., it lost $1.1 billion in operating profit over 46 days.

©2023 Visit at Distributed by Tribune Content Agency, LLC.


blog comments powered by Disqus