Report: Stellantis May Cut Loose Suppliers to Cope With EV Costs
Stellantis is reportedly considering dumping some of its suppliers to help offset the massive costs associated in transitioning to all-electric vehicles. As part of its Dare Forward 2030 strategy, the automaker plans on investing at least €50 billion toward electrification over the next decade and looks like it'll need every penny.
“When suppliers are not racing at the same speed of our teams, our teams see a big benefit to insource,” Stellantis CEO Carlos Tavares was quoted by Bloomberg as saying during a conference call from Melfi in southern Italy. “You come to the conclusion that what you have outsourced, you can do it in-house.”
Due to their mechanical simplicity relative to traditional vehicles using combustion engines, the assumption has always been that EVs would result in a leaner workforce and reduce staffing costs. Numerous manufacturers have even floated this idea, which would exacerbate industry layoffs, as a perk. Ford estimated that it could dump 40 percent of its workforce, suggesting that the figure could be similar for other companies.
Meanwhile, suppliers are fretting over whether or not to pivot to supporting EVs sold in limited quantities or continue trying to furnish components for combustion vehicles. But the bottom line is that the industry likely won’t need as many hands if electric vehicles become dominant and was already planning to consolidate wherever possible.
From Bloomberg:
Carmakers are pressuring suppliers to eke out more cost reductions amid slowing EV demand in Europe where elevated borrowing costs, subdued economic growth and waning subsidies weigh. At the same time, Chinese brands are expanding in the region with cheaper models. BYD Co. plans to offer its Seagull hatchback next year at a price below €20,000 [or $21,730 USD].
The company’s suppliers include Valeo SA, which Stellantis last year lauded as keeping a lid on costs. The Fiat and Jeep maker also works with Continental, Magna International, Forvia and Aptiv, among others.
The company and its partners are also adjusting investment levels for EV batteries to match vehicle demand, the CEO said. Earlier Tuesday, Stellantis’ battery partner Automotive Cell Company SE said it has paused construction at a €2 billion site in Germany to review plans and possibly switch to making lower-cost cells there.
On Melfi, which makes Jeep and Fiat models, Tavares said productivity and quality had improved. The company has been shedding jobs in the country, though recent talks with Italian unions were “constructive.”
Lowering costs are great if that results in consumers getting more-affordable cars. But industry layoffs have been taking place relatively consistently in both the United States and Europe for years — both of which owe over 5 percent of their total employment to the automotive sector.
We’ve also heard years of promises about automakers cutting costs as a way to help curtail high MSRPs. But vehicle prices remain quite high relative to the average income on both sides of the Atlantic. It’s understandable why Chinese brands offering cheaper (albeit not necessarily better) products have gained a foothold in the European Union as the region has simultaneously committed itself to pivoting toward electrification.
Make of the above what you will. Officially, Stellantis hasn't committed itself to anything. But leadership seems to be notifying the world that's about to change.
[Image: Stellantis]
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A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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The plan is to turn the car into a driveable cell phone, sell the customer on subscriptions and save on hardware like engines with software changes you charge extra for. What's not to love about this master plan? They've all gone mad over this. Well, just like a cell phone, most people will only buy a few apps, aftermarket software will pop up to give you that Nav system or more horsepower for pennies, people will buy based on price and battery time and the whole thing will be outdated in four years. Since cell phones range in price from $90 to $3000 are easy to make and make anywhere. People need cheap transportation so The $90 phone wins the day. The automakers are talking revolutionary changes but fail to understand technology is evolutionarily. Automakers like Stellantis have signed their own death certificates with this kind of thinking.
The whole concept of the private automobile being nothing more than a fast moving consumer device worked out so well for Jac Nassar! LOL. He was pursuing that avenue at Ford in the early 2K’s.