Barely two weeks after unveiling his plan to invest $35 billion into vehicle electrification, Stellantis CEO Carlos Tavares said Wednesday “the number could grow in the near future.”
The key reason is demand. The Portugese-born executive is confident that sales of plug-based vehicles will grow beyond even today’s most optimistic forecasts. If so, Stellantis will have to add more battery plants than those it has already announced.
“Today, we talking about five gigafactories,” Tavares said during a virtual roundtable with members of the Automotive Press Association. “Perhaps, in a few months we will be talking about more.”
The current plan calls for two in North America, three more in Europe.
After a slow start, rapid growth
While electrification of the auto industry got off to a slow start, the process is rapidly gaining ground, and it should gain even more momentum due to increasingly stringent government mandates, noted the 62-year-old Tavares. The European Union, for example, laid out a proposal to completely ban the sale of new vehicles with internal combustion engines by 2035.
But there is a hockey stick-style growth surge in the making, the Stellantis CEO said. His current forecast is that plug-based models — including both plug-in hybrids and pure battery-electric vehicles — will account for “no less than 70%” of the EU market by 2030. I think that number (is) relatively conservative.” As for North America, “It will be 40%-plus.”
In a wide-ranging conversation, Tavares talked about some of the challenges Stellantis is facing. At the top of the list is the ongoing shortage of semiconductor chips. He expects it “will drag into 2022.” And it is leading Stellantis to take several steps. For one thing, it is shifting what supplies it can come up with to critical products, such as the Ram pickup, and to important launches, such as the next-generation Jeep Grand Cherokee. Even so, the Ram is going to have to take production downtime because of shortages.
Looking forward, Stellantis is seeking ways to ensure it won’t face similar chip shortages. That may mean rethinking the sort of components it uses in its vehicles and possibly looking to form closer relationships with key chip suppliers.
Getting into the lithium business
Like a number of competitors, Stellantis is seeking ways to ensure it has access to basic raw materials needed for electrification. “By the end of the year,” said Tavares, he expects to announce deals with two lithium mining partners for the most critical element needed for lithium-ion batteries.
Meanwhile, Stellantis just this week was able to validate its plans to commercialize next-generation solid-state batteries. They are expected to store higher levels of energy — meaning better range and performance — while also lowering costs and reducing the risk of battery fires. Tavares expects to see the new technology come to market by around 2026.
If anything, he is confident consumers will take to the latest generation of battery-electric vehicles as they discover benefits, such as improved performance and lower energy costs as well as the potential benefits to the environment.
The newly formed company — created by a merger of Fiat Chrysler and PSA — expects to shift to battery power in all 14 divisions. The German-based Opel brand will quickly transition to being entirely electric, something that Tavares believes will help it crack into the Chinese market.
Jeep leading the charge
But even North American brands like Ram and Dodge will become increasingly electrified. During a strategy session earlier this month, Tavares and other Stellantis officials discussed plans for a number of brands. Ram, for example, will get an all-electric pickup by mid-decade. And Dodge will get its fastest-ever muscle car. At the time, the carmaker wouldn’t disclose what that all-electric model will be. Today, however, Tavares let slip that the Challenger and Charger models will go electric.
If anything, Jeep will lead the North American push, said Tavares. It has had unexpectedly strong success with the launch of its first plug-in hybrid, the Wrangler 4xe, which now makes up about 20% of the sales of that iconic SUV. All Jeep models will be available with PHEV packages by mid-decade. About the same time, there will be BEV models in all Jeep product segments, the company said this month.
It’s now been six months since the FCA-PSA merger was completed and, if anything, Tavares claimed the new company is ahead of schedule on its goal of achieving 5 billion euros — or $5.8 billion — in cost savings. That will be critical, he emphasized, for Stellantis to help offset the higher cost of electric vehicles.
Pricing problems
One of his big concerns, confided Tavares, is a surge of inflation. And that could make worse the impact of rising prices on industry sales.
The price of a typical new vehicle sold in the U.S. in June reached a record of more than $42,000, Kelley Blue Book reported this week. That’s up from barely $36,000 at the beginning of 2020.
“We don’t want to disconnect from the middle classes. We want to keep on being affordable,” said Tavares, adding that “It is very important we protect affordability, precisely at the time we are introducing electromobility.”
If vehicle prices continue to run rampant, he warned, more buyers will be priced out of the market. That will, in turn, hurt company earnings and impact jobs. That, in turn, could weaken the economy, creating a vicious, downward cycle.
