Stellantis CEO Says Company Being 'Forced' To Make Electric Vehicles

Tesla Inc TSLA released its Model S in June 2012. Over the years, the company has watched its production and deliveries numbers rise along with its share price. Leading automotive companies such as Ford Motor Company F and General Motors Company GM are investing heavily in electric vehicles to take on Tesla.

One vehicle company recently spoke out about electric vehicle adoption and the challenges the automotive industry is facing with changing times.

What Happened: Automotive companies are being “forced” to invest in new plants and higher production costs compared to traditional internal combustion engine cars, according to Stellantis NV STLA CEO Carlos Tavares.

Stellantis is the owner of brands such as Chrysler, Dodge, Fiat, Jeep, RAM, Opel, Peugeot, Maserati and others. The company is considered a laggard in the electric vehicle sector.

“There is no way we can transfer 50% of additional costs to the final consumers because most parts of the middle class will not be able to pay,” Tavares said at the Reuters Next conference.

Tavares said the costs associated with the move to electric vehicles are “beyond the limits” of what the industry can sustain and could lead to job cuts or lower profit margins.

The Stellantis CEO argues electric vehicles cost more upfront and could lead to volume declines because fewer consumers can afford them.

“What has been decided is to impose on the automotive industry electrification that brings 50% additional costs against a conventional vehicle.”

Tavares said the two paths Stellantis and others will have to take in the industry is increasing the price of vehicles and sell less of them or have lower profit margins on vehicles. Both options could lead to cutbacks and thousands of lost jobs, the CEO said.

Related Link: UK And Norway Hit Record EV Market Share In November: What Are The Top Brands? 

Why It’s Important: Stellantis said in July 2021 that it was spending $34 billion to invest in electrification through 2025. Other rivals such as Ford and General Motors are betting heavily on a shift to electric vehicles.

While other automotive companies are actively pursuing ways to gain market share and lower costs in the electric vehicle space, Tavares is likely not making fans with consumers and automotive peers.

“The future will tell us who is going to be able to digest this and who will fail. We are putting the industry on the limits,” Tavares said.

The comments could also be a welcome sign from Tesla, which has seen demand continue to rise and faces concerns it will lose market share from competitors finally joining the electric vehicle space. Tesla has put an emphasis on vertical integration to keep its costs low.

STLA Price Action: Stellantis shares were up 3.54% to $18.42 Monday at market close. Shares of the automotive company are down 2% year-to-date in 2021.

Photo: Chrysler Pacifica Pinnacle hybrid courtesy Stellantis