Stellantis won’t follow Tesla with price cuts

20 January 2024

In a world where price wars are an everyday reality, Stellantis CEO Carlos Tavares stands firm, pledging to protect the automaker's profitability. Stellantis, known for being one of the industry's most profitable companies, is ready to navigate the turbulent waters of the electric vehicle market without slashing prices that could jeopardize its bottom line. Tavares, while unveiling the company's new platform for large battery electric vehicles, emphasized the importance of maintaining pricing sanity in the EV arena.

With the electric vehicle market becoming increasingly competitive, some automakers are resorting to dramatic price cuts in a bid to gain an edge. Tesla yet again reduced the prices of its Model Y in Europe, following a similar move in China. However, Stellantis is charting a different course. Tavares believes that recklessly cutting prices, without considering the underlying costs, could lead to a destructive price war that ultimately harms the entire industry.

"If you go and cut pricing disregarding the reality of your costs, you will have a bloodbath. I am trying to avoid a race to the bottom," Tavares warned. He cautioned against repeating the mistakes of a certain company, which he did not name but was clearly referring to Tesla, whose profitability "brutally collapsed" after aggressive price reductions.

Stellantis, formed through the merger of Fiat Chrysler and PSA Group in 2021, is no stranger to the challenges of the automotive industry. Although the company has a strong presence in the European EV market, it is only now preparing to launch its first all-electric models in the United States this year, with the all-new Jeep Wagoneer among them.

What sets Stellantis apart from some of its competitors is its profitability, which acts as a shield against the pressures of pricing wars. Tavares emphasized that the company's financial strength allows it to resist the temptation of price cuts that could potentially spell disaster for less financially stable rivals. Stellantis feels strong with its net profit margin going up by 22.65% year-on-year and sitting at 11.1%, while Tesla so far has seen that number fall 48.24% - down to 7.94%.

Tavares also highlighted the significance of upcoming elections in the US and Europe, stating that they would determine the pace of Stellantis' $32 billion investment plan in electric vehicles. Depending on the election outcomes, the company's spending on EVs could either accelerate or slow down.

While Stellantis is poised to introduce its first fully electric Jeep SUV and electric Ram pickup in the US this year, it's worth noting that some American car buyers have been hesitant to embrace EVs due to high prices and a lackluster charging infrastructure.

In Europe, upcoming elections in June could also impact the adoption of electric vehicles, as the new parliament's stance on EV regulation remains uncertain. Last year, Germany's lobbying efforts to include e-fuels in the EU's regulation, effectively banning new sales of combustion-engine cars by 2035, nearly derailed the legislation.

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