EV costs are 'beyond limits' of what auto industry can sustain: Stellantis CEO

While some auto companies around the world have already set targets to transition their complete lineup into electric models, Stellantis CEO Carlos Tavares believes that the pressure to accelerate the shift to EVs can potentially threatens jobs and vehicle quality. Manufacturers struggle to manage the higher costs of building EVs, he told Reuters in an interview.

Tavares said that the costs of building EVs are "beyond the limits" of what the auto industry can sustain. "What has been decided is to impose on the automotive industry electrification that brings 50% additional costs against a conventional vehicle," he said.

He explained that it will not be justified to transfer the 50% of additional costs to the final consumer because then most parts of the middle class will not be able to afford such vehicles. In such scenario, either an OEM can charge higher prices and sell fewer cars or simply accept lower profit margins, Tavares added.

Further, he elaborated that manufacturers need ample time for testing the new technology and ensuring that it will work. "Pushing to speed that process up is just going to be counter productive. It will lead to quality problems. It will lead to all sorts of problems," he said.

Stellantis is looking at avoiding any such cuts by boosting productivity at a pace far faster than industry norm. Over the next five years, the company aims to reach 10% productivity annually as compared to the industry norm of delivering just 2 to 3% productivity improvement, said Tavares.

The world's fourth largest carmaker has been under pressure from electric vehicle makers such as Tesla and Rivian. Though these companies are far smaller in terms of vehicle sales and employment, investors have given them higher market valuations.

(with inputs from Reuters)