According to Stellantis CEO Carlos Tavares, the pressure being placed on automakers to accelerate the industry’s transition into electric vehicles could be detrimental to job security and vehicle quality as automakers grapple with the higher costs of building EVs.
In an interview with Reuters, Tavares claims the higher costs of building EVs are “beyond the limits” of what the auto industry as an ecosystem is capable of sustaining. Just because governments and public investors want to see EV production ramp-up doesn’t mean the end game is healthy for the business, let alone the end user. Or the environment. And that’s to say nothing of whether or not there are even enough necessary resources to go around for the industry to scale up electric vehicle production.
“What has been decided is to impose on the automotive industry electrification that brings 50% additional costs against a conventional vehicle,” Tavares was quoted as saying. “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.”
The flip side of that conundrum is to simply charge higher prices for each vehicle and accept a lower volume of sales and production. But that doesn’t sit well with union leaders in North America and Europe who claim job losses could total in the tens of thousands due to the production cutbacks.
Tavares also said climbing the EV curve demands automakers boost productivity at a pace faster than is sustainable for the industry. Traditionally, the auto industry can find 2-3% efficiency gains year-over-year, but over the next five years automakers will need to post productivity gains in the 10% range. “The future will tell us who is going to be able to digest this, and who will fail,” Tavares said. “We are putting the industry on the limits.”
Many analysts project the costs of battery electric vehicles will fall towards the back half of the decade, and could even reach cost parity with combustion vehicles by that point. Of course, that’s without considering whatever consequences or costs could come from increased procurement of commodities needed for EV production.
As we’re taught in basic economics class: there’s no such thing as a free lunch.
The pressure being placed on legacy automakers that Carlos Tavares is describing is, in some ways, unfair. Companies like Tesla and Rivian operate at minuscule volumes in terms of vehicle sales (despite their wild valuations) and employment compared to companies like Stellantis, or General Motors, yet the stock market has granted these small startups massive valuations and investors are demanding the big players behave the same way. But that’s nothing out of the ordinary. Wall Street rarely gives Detroit the nod.