Stellantis CEO warns of ‘bloodbath’ for electric vehicles if industry follows Elon Musk in ‘race to the bottom’
Carlos Tavares, CEO of Stellantis, warned of competitors reducing prices for electric cars to boost demand. Marco Bertorello/AFP via Getty Images
As demand for electric vehicles declines, Elon Musk has stayed ahead of the industry by cutting prices on Tesla’s flagship vehicles and sacrificing profitability to boost demand. But the rival CEO warned of the potential for a “red ocean” if his rivals followed suit.
Carlos Tavares, CEO of Stellantis, Chrysler’s parent company, warned of a “race to the bottom” among electric vehicle manufacturers after rival Ford announced it would cut production and lay off workers who make its F-150 Lightning electric truck.
“If you go and cut prices ignoring the reality of your costs, you’re going to have a bloodbath. I’m trying to avoid a race to the bottom,” Tavares said at an event in Amsterdam on Friday, where he also unveiled Stellantis’ new large battery system.
Tavares’ comments coincide with a slowdown in the electric vehicle market that is forcing manufacturers to pull back on the onslaught of investing in new car technology. Last year, US automakers rushed to catch up with market leader Tesla, spending billions on new electric vehicle lines. But sales are slowing and profits are taking a hit, too. It is worth noting that none of the four largest US automakers, including the Big Three in Detroit along with Toyota, are competing for a Super Bowl ad for the first time since 2001.
Ford has admitted that its electric vehicle production line lost an estimated $4.5 billion in money last year. General Motors fell short of its electric vehicle production target last October. As the costs of owning a car continue to rise, lowering sticker prices is a way for automakers to temporarily maintain demand — but it can be risky.
“I know a company that cut prices brutally and whose profitability brutally collapsed,” Tavares said, without mentioning Tesla or Musk. In fact, January this year had the worst start ever since Tesla went public.
Elon Musk’s electric car giant began cutting prices last year in an attempt to stay ahead in a slowing market filled with new competitors. These cuts reduced Tesla’s profit margin by more than 40% year-over-year, as of last year’s third-quarter earnings report. With interest rates remaining high, Tesla will need to continue to lower prices in order to keep monthly payments low enough to be attractive to consumers, Musk said in a post-earnings call. It cut the price of its Model Y SUV by more than $5,000 for some European buyers this week, after recently doing the same in China.
Stellantis announced earlier this month that it would reduce operating costs by closing factories and laying off about 1,350 workers. However, so far, it has not budged on the sticker price of its Dodge and Jeep electric vehicles.
“When you do that, things become very difficult in the future,” Tavares said.
Representatives of Tesla and Stellantis could not immediately be reached for comment.