Automaker Stellantis is preparing to cut costs globally to continue pricing affordable electric vehicles for the middle class, per Click On Detroit.
Stellantis CEO Carlos Tavares told reporters at the 2023 CES gadget Show in Las Vegas that EVs will be out of reach for the middle class without price drops. It would result in a reduction in demand and raise prices even more.
“If the size of the market shrinks, you are back to square one because you are reducing the efficiency and effectiveness of your manufacturing operation. You go from hero to zero in three years if you stop working on costs.”
Stellantis CEO Carlos Tavares
Stellantis to reduce production facilities
The report also added that one significant cut that the company is planning to reduce their factories. It is because EVs are around 40% more expensive than gasoline-powered automobiles.
After declaring plans to shut down its Illinois facility in Belvidere, the reduction of the Stellantis factory in the US started last month. The company also has plans to dismiss 1,350 workers at the plant permanently.
Although no new vehicle has been assigned to the facility located roughly 110 kilometers (70 miles) northwest of Chicago, it currently produces the Jeep Cherokee small SUV.
Stellantis CEO Carlos Tavares said they are unsure about the Belvidere plant being closed or whether the costs would go higher. Nonetheless, the company needs to be ready as global vehicle markets are expected to decline.
He said that the company still needs to observe things in the following months and adapt its decisions if the economic status improves.
“Are we sure that we will not need the (factory) capacity? No, we are not sure. If you keep for a signification amount of time capacity that you don’t use, you put yourself in trouble. That’s what experience shows. So you need to continually adjust your capacity to your needs.”
Stellantis CEO Carlos Tavares
It is not all good things while running a business. Tavares claimed that Stellantis had experienced an increase in production expenses, particularly for raw materials and due to the scarcity of computer chips.
To balance off those expenditures, as well as the rising cost of EVs, the company must reduce fixed, variable, and distribution costs. Otherwise, Tavares said, cars will be costly, or their profit margins will decline.
