Electrification Advanced by Politicians, Not the Industry


Despite Stellantis making formal announcements that it will be investing 30 billion euros ($34 billion USD) into its novel electrification strategy, CEO Carlos Tavares has been making it sound as if the automaker’s plan was crafted under duress. He’s been telling European media that the widespread adoption of EVs is primarily being pushed by politicians who are ignoring the environmental risks and logistical shortcomings.

“What is clear is that electrification is a technology chosen by politicians, not the industry,” he said told the press this week. 

He likewise stressed that the bans being proposed for internal combustion engine vehicles are fundamentally transforming the industry’s existing facilities and supply chains. Europe has suggested banning the sale of new internal combustion vehicles by 2035. Canada has a similar strategy, creating a “mandatory target” that would require all new light-duty vehicles sold within the country to be zero-emissions by 2035.

As politics are often fluid, the above aren’t really guarantees. But the organized push for mandating emissions-free driving (at least in terms of what comes out of the vehicle itself) is undoubtedly growing and automakers are complying in advance. Tavares told Les Echos, Handelsblatt, Corriere della Sera, and El Mundo this was exacerbating supply chain problems by creating an industrywide shakeup. On a longer timeline, he worried that it would result in the sudden collapse of automotive jobs and product lineups that are not aligned with consumer needs or the realities of the market.

Then there’s the matter of how green the green movement really is. We’ve talked about the negative aspects of battery production before — everything from child-labor issues to the fight for raw materials and the risks associated with volatile waste disposal. But it’s fairly rare to hear it coming from an automotive executive that just promised to spend several billion dollars developing EVs.

“Given the current European energy mix, an electric car needs to drive 70,000 kilometers (43,496 miles) to compensate for the carbon footprint of manufacturing the battery alone and to start catching up with a light hybrid vehicle, which costs half as much as an EV,” Tavares told reporters.

Automotive News likewise reported Tavares as stressing the finances of the situation. If EVs remain priced well above their internal-combustion counterparts, they’ll never achieve mass appeal. He also noted that it’s the same situation for manufacturers investing heavily into electrification and competing for natural resources, linking it to earlier promises he made not to shut down factories located in Europe. Though the money problem wasn’t wholly tied to EVs, as the region has some of the highest labor costs around.

From AN:

“I generally hold on to the promises I make, but we also need to remain competitive,” he said, citing in particular production costs in Italy which were “significantly higher, sometimes the double of those at plants in other European countries,” mainly due to “exorbitant” energy prices.

Pointing to Rome, where the government is working to bring down industrial costs, he said: “It takes some time for the measures to be implemented. We will discuss this again at the end of 2022.”

While I’m inclined to agree with Tavares that EVs are being crammed down our collective throats faster than seems prudent, there are lots of items at play here. When PSA Group joined with Fiat Chrysler Automobiles (FCA) to form Stellantis, the latter company really hadn’t expressed much interest in electrification. Handelsblatt also noted (in German) that FCA has only been able to comply with European requirements for CO2 emissions because it had purchased carbon credits from Tesla for several billion euros. Those are set to expire this year, making it so the company will have to comply with the region’s stringent regulations or pay the EU sizable fines.

Tesla also exists as a partial exception to Tavares’ claim that the industry is being forced into electrification. While the government incentives and regulatory fines absolutely benefit the brand, it emerged organically to see if all-electric vehicles could be sold in the United States. But even Tesla CEO Elon Musk has started worrying that continued government involvement runs the risk of favoritism and stifling innovation. He believes that the technology is mature enough to let the existing U.S. tax credit scheme (which his company can no longer take advantage of) continue playing out and opposes the Biden administration’s preproposal to expand them under the now-stalled Build Back Better Act.

There are also concerns about how much leverage the swap to EVs would give China. The nation is currently the undisputed global king of producing the components necessary for lithium-ion batteries. As of 2019, China was responsible for over 60 percent of the world’s cathode materials going into electric cars, 83 percent of anodes, and held a 73 percent market share of all cell manufacturing. Considering how poorly having semiconductor chip production localized in Asia has worked out for Western automakers, it’s not unthinkable a similar situation could play out with batteries.

However, none of that precludes electrification. The above problems are less about EVs being bad than the ham-fisted nature in which they’re being advanced. Tavares is largely correct in asserting that government involvement is fundamentally changing the industry without giving much consideration as to what could go wrong. But it likewise seems that a portion of his gripes are based upon Stellantis not being quite so well positioned as some of its rivals.

That said, Tavares was the man responsible for cautiously introducing the Nissan Leaf to the Americas — back before the segment had much in the way of competition.

“We are prepared to make a profitable business once it reaches a certain level,” he said in 2009. “We don’t expect to start making a profit immediately, but we certainly see a business case. We are shifting completely from internal combustion, and we can’t expect that electric vehicles will have the same profitability that gas cars have after 100 years of development.”

Considering that it took Tesla (the most successful EV manufacturer in history) until 2021 to get its finances in the black without leaning on its sale of emissions credits to other automakers, the dude might be onto something.

[Image: Frederic Legrand COMEO/Shutterstock]

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