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EV cost burden pushing automakers to their limits, says Stellantis' CEO Tavares

DETROIT — Stellantis CEO Carlos Tavares said external pressure on automakers to quickly shift to electric vehicles potentially threatens jobs and vehicle quality as producers struggle with EVs' higher costs. Governments and investors want car manufacturers to speed up the transition to electric vehicles, but the costs are "beyond the limits" of what the auto industry can sustain, Tavares said in an interview at the Reuters Next conference released Wednesday. "What has been decided is to impose on the automotive industry electrification that brings 50% additional costs against a conventional vehicle," he said. "There is no way we can transfer 50% of additional costs to the final consumer because most parts of the middle class will not be able to pay." Automakers could charge higher prices and sell fewer cars, or accept lower profit margins, Tavares said. Those paths both lead to cutbacks. Union leaders in Europe and North America have warned tens of thousands of jobs could be lost. Automakers need time for testing and ensuring that new technology will work, Tavares said. Pushing to speed that process up "is just going to be counter productive. It will lead to quality problems. It will lead to all sorts of problems," he said. Tavares said Stellantis is aiming to avoid cuts by boosting productivity at a pace far faster than industry norm. "Over the next five years we have to digest 10% productivity a year ... in an industry which is used to delivering 2 to 3% productivity" improvement, he said. "The future will tell us who is going to be able to digest this, and who will fail," Tavares said. "We are putting the industry on the limits." Electric vehicle costs are expected to fall, and analysts project that battery electric vehicles and combustion vehicles could reach cost parity during the second half of this decade. Like other automakers that earn profits from combustion vehicles, Stellantis is under pressure from both establishment automakers such as GM, Ford, VW and Hyundai, as well as start-ups such as Tesla and Rivian. The latter electric vehicle companies are far smaller in terms of vehicle sales and employment. But investors have given Tesla and Rivian higher market valuations than the owner of the highly profitable Jeep and Ram brands. That investor pressure is compounded by government policies aimed at cutting greenhouse gas emissions. The European Union, California and other jurisdictions have set goals to end sales of combustion vehicles by 2035.

Ram 1500 TRX fuel economy figures are out — and economy isn't the right word

Ram published many statistics when it introduced the 1500 TRX, but one part of the puzzle was missing: fuel economy. It finally released those figures, and they confirm that supercar-like power brings supercar-like thirst. Driven with a light right foot, the TRX returns 10 mpg in the city, 14 mpg on the highway, and 12 mpg combined. It's the least efficient Hellcat-powered model; Jeep's Grand Cherokee Trackhawk scores 13 mpg combined, while Dodge's Charger and Challenger post 15. Figures for the Durango haven't been published yet, but there's no reason to think it will use more gas than the TRX. At 12 combined, the truck is about on par with the Lamborghini Aventador S. On the surface, that's not great. Keep in mind the mighty TRX was developed for off-road performance, however, and we doubt fuel economy entered the equation at all. It's a body-on-frame truck powered by a 6.2-liter V8 supercharged to 702 horsepower, it has mammoth 35-inch all-terrain tires to push around, and it weighs 6,350 pounds. Viewed in this light, 12 mpg is actually shockingly decent. Conversely, the folks who designed the Toyota Prius weren't concerned about its water fording ability, its approach angle, or its zero-to-60-mph time. Motorists who place fuel efficiency at the very top of their priorities list have a growing list of excellent options to choose from, even if they're in the market for a pickup. At the other end of the Ram spectrum, the rear-wheel drive 1500 posts figures of 23, 33, and 26, respectively, when it's equipped with the 3.0-liter turbodiesel V6. The TRX starts at $71,690 including destination, and it will arrive in showrooms later in 2020. Related Video:

Stellantis moves to set up its own lending unit

Stellantis is buying Houston-based auto lender First Investors Financial Services Group to set up its own finance arm in the U.S., a move that should support sales and eventually boost profit. The only major traditional automaker in the U.S. without its own finance company agreed to pay $285 million to a group of investors led by Gallatin Point Capital and Jacobs Asset Management, according to a statement. The transaction is expected to close by year-end. Stellantis was formed via the merger between Fiat Chrysler and PSA Group early this year. Carlos Tavares, the PSA boss who became the combined company’s chief executive officer, called the deal to acquire First Investors a milestone that will increase earnings and enhance customer loyalty. “Direct ownership of a finance company in the U.S. is a white-space opportunity which will allow Stellantis to provide our customers and dealers a complete range of financing options,” Tavares said Wednesday in the statement.  Having an in-house finance company has helped rivals General Motors Co. and Ford Motor Co. pad profits, especially during the global semiconductor shortage that has limited production and crimped sales. GM bought subprime lender AmeriCredit Corp. in 2010 and renamed it GM Financial. The operation generated a $2.76 billion profit in the first half -- roughly a third of the companyÂ’s adjusted earnings before interest and taxes. Trouble for Santander? The First Investors acquisition could spell trouble for Chrysler Capital, the operation that Santander Consumer USA Holdings Inc. and Chrysler set up in 2013 before the U.S. automaker completed its merger with Fiat. In a statement, Santander Consumer said itÂ’s committed to supporting Stellantis through the term of their existing agreement and its transition. Santander Consumer will also have “ongoing conversations with Stellantis about long-term mutually beneficial opportunities beyond 2023,” the company said, adding that its consumer business remains strong and has “delivered solid results for our shareholders.” This, along with support from its parent company, will allow the lender to “pursue additional opportunities as they arise.” The lenderÂ’s U.S.-listed stock fell 1.5% in New York trading Wednesday after Bloomberg reported Stellantis was preparing to announce a new finance partner. Stellantis shares rose as much as 1.3% in Paris trading Thursday.