Automobile manufacturers are all faced with the same challenge: reducing costs to increase margins on electric vehicles. In order to achieve this, Stellantis may stop working with certain suppliers and manufacture more parts internally.
Carlos Tavares’ group is facing a delicate situation. Some electric models sold by Stellantis have seen their sales plummet in recent months. This is particularly true for the small electric Fiat 500, production of which was even halted until September to deal with market slowdown. In reality, the automotive giant is mainly looking for the right formula to manufacture its electric vehicles.
The Franco-Italian-American group may have found the solution. In order to reduce costs, Carlos Tavares believes that it would be wise to separate from several suppliers in order to internalize the production of certain parts. Stellantis works with major subcontractors such as Valeo, Continental, Magna International, and Forvia. This has caused panic among the company’s partners.
“We have come to the conclusion that what we outsource, we can do internally,” according to the group’s CEO. This would allow them to “improve margins” and “accelerate development times,” he explains. In short, Mr. Tavares sees this as a way to facilitate the company’s transition to electrification. As a reminder, Stellantis aims to sell 5 million 100% electric cars per year by 2030.
Stellantis should have 75 100% electric models by this same date. While the company probably has the skills (maybe not all) to internalize the production of certain parts, this will not happen overnight. In the event that Tavares decides to implement this strategy, new factories would be needed, hundreds of people would need to be hired, and so on.
This is a hypothetical transition that seems quite distant. Furthermore, Stellantis has decided to pause the construction of new battery plants in Germany and Italy. Alongside Mercedes, Carlos Tavares’ group hoped to create an Airbus of the battery. But with the current market trends, the European joint venture prefers to proceed with caution. This also proves that it is not always easy to produce things by oneself.