Stellantis boss warns long EV transition poses cost ‘trap’ for carmakers

Unlock the Editor’s Digest for free

The chief executive of Stellantis has warned that delays to the electric vehicle transition pose a “trap” that will bring higher costs, cautioning against industry calls to water down regulations to cut carbon emissions.

Carlos Tavares, head of the European group behind the Peugeot, Fiat and Jeep brands, told the Financial Times that the industry would ultimately suffer from lower profitability if companies were burdened with investing in both the existing internal combustion technology and the switch to battery-powered vehicles.

“Making a transition for [EVs] longer is a big trap,” Tavares said on the sidelines of the Paris Motor Show, which kicked off on Monday. “When you make a longer transition, in fact, you don’t replace the old world by the new one. You add up the new world to the old.”

European car executives have urged regulators to consider adjusting the region’s new emissions standards that will come into force next year in light of the slowing growth of EV sales. That is heaping doubts on a 2035 European deadline for the industry to shift to all electric sales.

Martin Sander, who leads sales, marketing and after-sales at Volkswagen’s passenger car business, also called on governments to speed up the transition after demand for EVs fell sharply in Germany and other markets where state subsidies were removed or reduced.

“The most important thing is that customer demand and political regulations are in sync,” said Sander. The German carmaker is the most behind in meeting EU emission targets, according to analysts.

“I hope that we’re going to see clear commitments and signals from politicians that the future is electric. And then I’m convinced we also see customer demand picking up,” he added.

The regulatory pressures come as Stellantis also faces investor criticism for rising inventories in the US, which has led to a recent downgrade in its profit guidance and a management shake-up across the entire group.

Long seen as one of the car industry’s heroes after he turned around the PSA group behind Peugeot a decade ago and merged it with Fiat Chrysler in 2021, Tavares has recently been blamed for the aggressive pricing of vehicles that have turned off consumers in North America.

Tavares rejected suggestions that his decisions were the origin of the company’s current problems in the US, saying he had trusted the local US team with independently leading its pricing and inventory strategy.

“This plan was built, proposed, decided by the local team,” Tavares said, acknowledging that he had seen risks with its strategy from the beginning. “I was made aware of it. I hesitated — should I let it go or should I stop it — and I let it go. And it was a mistake. It did not work.”

Tavares pledged that the US inventory build-ups would be fixed by Christmas under a new management team following last week’s reshuffle that led to the ousting of Stellantis’s finance chief.

Tavares’s own time at the group has now been firmly cut off at 2026, when his mandate as chief executive expires, after Stellantis’s board last week formalised the search for his successor and confirmed he would retire then.

He will still have to show he can turn around the company in the meantime to see out the next 18 months.

Car dealers, suppliers and labour unions have criticised Tavares, saying his ruthless focus on cost cuts and margins had reached its limit and that the company needed to find other avenues to improve its profitability.

Tavares hit back, however, saying Stellantis needed to focus on making EVs more affordable to consumers and survive competition with the cheaper offering of Chinese competitors.

“There are no limits to what the customer’s asking for,” Tavares said, implying the pressure to cut costs would remain.

He added that car factories in Europe, already struggling with overcapacity issues, would come under further strain if Chinese companies succeeded in reaching a 10 per cent market share in the region in the coming years.

While Tavares has said there are “no taboos” on what Stellantis should do to survive, he added that he was not necessarily advocating purely for job cuts or factory closures, saying carmakers had other tools they could use too, including speeding up their research and development.