Citroen, Jeep may close factories as EV production costs rise

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Chief Executive Carlos Tavares said Stellantis NV is likely to idle more auto manufacturing plants as it contends with higher inflation, in addition to the cost of electrifying its product line.

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Updated on:
January 6, 2023 at 09:50 am

The all-electric Jeep Avenger SUV is on display at the Paris Motor Show. Jeep brand owner Stellantis is likely to close more facilities as the cost of electric vehicle production rises.  (Bloomberg)
The all-electric Jeep Avenger SUV is on display at the Paris Motor Show. Jeep brand owner Stellantis is likely to close more facilities as the cost of electric vehicle production rises. (Bloomberg)

“If we don’t optimize our cost structure, we won’t be able to absorb the additional cost of electrification,” which could lead to higher car prices and a shrinking market, Tavares told reporters at the Consumer Electronics Show in Las Vegas. “If the market shrinks, we don’t need as many plants. Some unpopular decisions will have to be made.”

The Netherlands-based automaker said last month it would suspend production at a Jeep manufacturing plant in Belvidere, Illinois, starting Feb. 28, leading to an undisclosed number of job cuts. Still, Tavares said Stellantis could “adjust” its decision on the plant if auto demand rebounded.

Automakers are already feeling the pinch of an inflationary spiral that is holding back some buyers, even as semiconductor shortages plaguing the industry in the wake of Covid are starting to ease. In Europe, Volkswagen AG said last month that 2023 could be “more challenging” than 2022 as inflation and a deteriorating economic outlook dent demand.

An environment of rising interest rates, rising inflation and other economic headwinds is also starting to affect automakers outside of Europe. Tesla Inc. reported earlier this week that it missed deliveries for the third time in a row despite generous incentives in its biggest market, while the chief executive of Chinese electric car maker NIO warned The first half of the year was full of challenges.

Stellantis has no choice but to keep cutting its fixed, variable and distribution expenses to stay competitive and make electric vehicles more affordable for the middle class, Tavares said Thursday, adding, “If you stop trying, you will From hero to zero cost in three years.”

“It doesn’t always make us popular, but it’s the right thing to do,” he said. “If you keep a lot of time that you don’t use, you’re getting yourself into trouble. You need to constantly adapt your capabilities to your needs.”

Tavares is also considering whether to stop making cars entirely in China, the world’s largest auto market.

Stellantis is continuing talks with its Chinese partners over Peugeot and Citroen cars, as staying in China “with substantial assets would pose a significant risk” if geopolitical tensions with the Western world escalate.

“The negotiations were tough, they respected each other and it’s not over,” Tavares said in Las Vegas.

Stellantis may eventually pursue an “asset light” strategy for the brands in China, he added. Earlier this year, Tavares used the same term to describe the decision to pull out of the company’s sole Jeep factory in Asia’s largest economy.

First published date: Jan 6, 2023 at 09:50 AM CST

https://auto.hindustantimes.com/auto/electric-vehicles/citroen-jeep-may-shut-facilities-amid-rising-cost-of-ev-production-41672978338363.html

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