Stellantis NV might idle additional auto manufacturing plants as it grapples with higher inflation on top of the cost of electrifying its lineup, chief executive officer Carlos Tavares said on Thursday.
“If we don’t optimize our cost structure, we cannot absorb the additional cost of electrification,” which risks leading to elevated prices and a shrinking market, Tavares told reporters in Las Vegas for the Consumer Electronics Show. “If the market shrinks, we don’t need so many plants. Some unpopular decisions will have to be made.”
The Netherlands-headquartered automaker last month said that it would idle a Jeep-making factory in Belvidere, Illinois, effective on Feb. 28, which would result in layoffs of an unspecified number of workers.
Photo: AFP
Still, should demand rebound, Stellantis might “adapt” its decision on that plant, Tavares said.
Automakers are already feeling the pinch of spiraling inflation, which is holding back some buyers even as semiconductor shortages that dogged the industry in the aftermath of the COVID-19 pandemic started easing.
In Europe, Volkswagen AG last month said that this year would likely be “even more challenging” than last year as demand is restricted amid high inflation and a worsening economic outlook.
An environment of higher interest rates, rising inflation and other economic headwinds has also begun to affect automakers outside of Europe.
Tesla Inc earlier this week reported a third straight deliveries miss despite offering hefty incentives in its biggest markets, while the CEO of Chinese electric automaker Nio Inc (蔚來汽車) has warned of a challenging first half.
Stellantis has no choice but to keep slashing its fixed, variable and distribution expenses to stay competitive and to make EVs more affordable for the middle classes, Tavares said, adding: “You go from hero to zero in three years if you stop working on costs.”
“It doesn’t always make us very popular, but it’s the right thing to do,” he said. “If you keep for a significant amount of time capacity that you don’t use, you put yourself in trouble. You need to continuously adapt your capacity to your needs.”
Tavares also is still considering whether to stop manufacturing vehicles altogether in China, the world’s biggest auto market.
Stellantis is continuing talks with its Chinese partner for Peugeot and Citroen vehicles because remaining in China “with an asset heavy presence would represent a major risk” should geopolitical tensions with the West escalate.
“The talks are difficult, they are respectful and they are not finished,” Tavares said.
Stellantis might implement an “asset-light” strategy for those brands in China, he said.
Earlier this year, Tavares used the same phrase to describe a decision to pull out from the company’s only Jeep plant in Asia’s largest economy.
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