Stellantis Chief Executive Carlos Tavares is forecasting automotive suppliers to face a tough challenge amid the rapid electric vehicle transition, Reuters reports.
Stellantis CEO says EV push will strain auto suppliers due to price cuts
Multinational automaker Stellantis has been pointing out the significant price disparity between electric vehicles and their internal combustion engine-powered counterparts. This issue continues to push the company to bet on viable alternatives, particularly hybrids.
According to the report, Stellantis CEO Carlos Tavares declared during the Bernstein Strategic Decisions conference on Wednesday that the electric vehicle shift would inflict a “significant burden” on automotive suppliers. Western automakers continue to rely on price cuts to remain competitive against cheap China-made electric vehicle models.
CEO Tavares noted that automakers struggle to sell electric vehicles at the same price as ICE-powered equivalents despite a 40%-50% higher production cost than the latter.
In effect, automakers have no choice but to rely on price cuts at each segment of their operations, especially supply chains and logistics.
“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. The EV race has become a cost cutting race.”
Stellantis CEO Carlos Tavares
Challenge of matching Chinese EV cost-competitiveness
The Stellantis boss explained during the recent conference that the issue of affordability continues to impede electric vehicle adoption.
CEO Tavares further noted that customers’ decision to acquire expensive electric cars heavily relies on government incentives.
“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.”
Stellantis CEO Carlos Tavares
All these considered, Stellantis decided to continue offering multi-energy platforms. It enables the company to cover both spaces for flexibility: battery-electric and hybrid electric vehicles.
“Today multi-energy is good to face uncertainty.”
Stellantis CEO Carlos Tavares
Push for affordable EVs
While recognizing the current cost barrier to electric vehicles, Stellantis is actively developing low-cost models to accelerate wider adoption.
For instance, it confirmed plans to launch the highly awaited Jeep electric vehicle “very soon” on the US market. It would have a base price of sub-$25,000.
It will join the affordable Citroen e-C3 in Stellantis’ low-cost EV lineup, costing only €20,000 ($21,600) in Europe.
In addition, Stellantis and Chinese player Leapmotor announced a new joint venture, the Leapmotor International, in mid-May 2024. This partnership will enable Stellantis to sell Leapmotor’s T03 model for only sub-€20,000 in the European market.
As for mergers and acquisition (M&A) prospects, the Stellantis boss emphasized the company’s focus on maintaining a strong business status. Nonetheless, CEO Tavares admitted that they must be ready to grab new opportunities when they arrive.
All that said, high upfront costs continue to serve as a major barrier to electric vehicle uptake. Unless they become more affordable, customers will remain reluctant to join the shift to clean mobility. Automakers will have to rely on price cuts, potentially straining automotive suppliers and making a dent in the industry.
