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Stellantis CEO Claims Electrifications Costs Are "Beyond The Limits"

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【Summary】The CEO went on to say that the external pressure on automakers to switch to electric cars could threaten jobs and affect vehicle quality.

Original Vineeth Joel Patel    Dec 05, 2021 6:40 AM PT
Stellantis CEO Claims Electrifications Costs Are

If automakers weren't being forced to make electric vehicles because of emissions and fuel regulations, Stellantis, which was previously FCA, would never make an electric car. The brand that houses Dodge, Jeep, Alfa Romeo, Maserati, and Chrysler has paid Tesla hundreds of millions of dollars a year on regulatory credits instead of focusing its efforts on electric vehicles. A report from CNBC earlier this March stated that FCA spent $362 million on regulatory credits in 2020 for the European market. The majority of credits FCA purchased came from Tesla.

EV Adoption Could Affect Auto Industry

Stellantis can no longer rely on automakers for credits and finally has to start developing electrified vehicles if it wants to sell cars. That explains why Dodge is finally putting the Charger and Challenger Hellcat to rest in the upcoming few years and Jeep has introduced an electrified version of the Wrangler. While Stellantis is working on electrified vehicles, it's not happy that it's being forced to do so and warns that there are potential side effects for the automotive industry switching over so quickly.

According to Reuters, Stellantis Chief Executive Officer Carlos Tavares stated that the costs for automakers to transition to electric cars are "beyond the limits" of what the industry can sustain in an interview with the outlet. "What has been decided is to impose on the automotive industry electrification that brings 50% additional costs against a conventional vehicle," he said. "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."

Tavares is right. The costs of switching gears to focus on electrification are incredibly high for automakers. But, the majority of automakers started to electrify their vehicles decades ago. Even General Motors, which sells inefficient pickup trucks and sports cars, first sold a hybrid vehicle in the form of the 2004 Chevrolet Silverado Hybrid. Toyota first introduced the hybrid Prius for the Japanese market in 1997. Electrified vehicles aren't new and automakers have been looking into them for decades. Stellantis hasn't and it's now playing catchup.

 Adoption

Automakers that don't have a lot of experience in electrified vehicles, like Subaru, have decided to enter into partnerships with companies that do, like Toyota. Partnerships have become crucial in the age of electrification, as automakers look to reduce the costs associated with developing EVs. Instead of working with other automakers, Stellantis has decided to partner with suppliers.

In light of finally realizing that it's behind the times, Stellantis' CEO claims the automaker has two options: charge higher prices and sell fewer cars, or accept lower profit margins. Tavares claims that both options will lead to cutbacks. Union leaders in Europe and North America side with Tavares, warning that tens of thousands of jobs could be lost as automakers switch to electric vehicles. Additionally, since automakers need time to test new electrification technology, Tavares claims that forcing automakers to quickly come out with EVs instead of allowing them to take their time will lead to quality issues.

To avoid job cuts, Tavares claims that Stellantis will boost productivity beyond the industry norm of 2-3 percent to 10 percent. This will also, supposedly, help Stellantis lower the costs of developing electric cars.

As more automakers come out with electric cars and consumers make the switch, prices to manufacture EVs and batteries are coming down. During its EV Day earlier this year, Stellantis stated that it would invest $34 billion into electrification through 2025. The money will go toward new tech, new platforms for EVs, new electrified models, and new battery plants.

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