A major automotive manufacturer, Stellantis, the company behind Chrysler, Jeep, Dodge, and Ram vehicles, is issuing a warning about the potential pitfalls in the current trajectory of the automotive industry. The concern revolves around the increasing costs associated with electric vehicles (EVs) and their potential impact on both dealerships and new car buyers.
Tech Costs and Market Size
Stellantis suggests that the manufacturing of electric vehicles might seem less complex than traditional internal combustion engine vehicles, but the technology involved comes with its own set of challenges. The CEO emphasizes that the cost of technology, particularly powering electric vehicles, could lead to a smaller market for new cars. This, in turn, might have implications for the auto industry, including the possibility of job cuts.
Impact on Jobs and Buyers
Already experiencing job cuts in automotive manufacturing, the industry is facing challenges even before electric vehicles constitute a large percentage of overall vehicle sales. Stellantis highlights that the impact extends beyond job losses; it could affect buyers directly. The challenge lies in making electric vehicles affordable for the middle class, as the shift to EVs could potentially make new cars 40 to 50 percent more expensive.
Affordability Concerns and Market Contraction
The CEO raises a red flag, warning that if changes are not implemented in the manufacturing process, electric vehicles could become 40 percent more expensive than their gasoline counterparts. This, combined with the already high cost of new cars, poses a significant challenge to making electric vehicles accessible to the middle class. Affordability concerns not only affect sales but could also lead to a contraction in the automotive market.
Employment and Climate Impact
The warnings extend to the dealer side, where reduced vehicle purchases by the middle class could lead to a shrinking market. This, in turn, could result in fewer manufacturing plants, employees, and suppliers, creating a domino effect on employment. Moreover, the CEO emphasizes that failure to sell electric vehicles to the middle class could undermine climate goals, as the intended impact of EVs depends on their widespread adoption.
The CEO underscores the urgency for changes in the industry, emphasizing that if cost reductions are not achieved by the end of the decade, the automotive industry could face a significant downturn. The transition from combustion vehicles to electric vehicles is predicted to be a monumental management and industry transition, potentially one of the most significant shifts in consumer adoption in the history of the Industrial Revolution.