The market for battery-electric vehicles is accelerating faster than many in the auto industry anticipated just a few years ago, but there remain plenty of obstacles to consumer acceptance — and the ability of automakers to meet demand, Stellantis CEO Carlos Tavares said Tuesday.
BEV sales in the U.S. nearly doubled in 2021, and the upward trend continues this year, despite the ongoing semiconductor shortage. For its part, the company formed last year by the merger of Fiat Chrysler Automobiles and the PSA Group is still playing catch-up. While Stellantis has a number of BEVs on sale in Europe, it will only launch its first model in the U.S., a version of the ProMaster van, next year. By 2024, however, Tavares confirmed there will be all-electric models in the Chrysler, Dodge, Ram and Jeep brand line-ups.
“The trend is showing there is an acceleration” in EV adoption, said Tavares during a video roundtable with a dozen journalists. For Stellantis, he added, “We are happy to be in the execution mode. Full Speed ahead.”
The automaker underscored that on Tuesday by announcing plans to set up a new, $2.5 billion battery plant in Kokomo, Indiana. It’s the fifth — and last of the “Gigafactories” Stellantis said it would build during a March event during which Tavares outlined the company’s EV strategy. All told, the plants will have the capacity to produce 400 gigawatts worth of batteries by 2030. That’s about three times the global production of automotive batteries in 2020, according to research firm Adamas Intelligence.
By the time the five plants reach capacity at the end of the decade, Stellantis expects to have 25 BEVs in production in the U.S. alone, with dozens more in markets such as Europe and China. The automaker expects those products will make up about half of its U.S. sales — in line with the target outlined earlier this year by President Joe Biden.
But there are likely to be “many bumps” along the way, Tavares cautioned Tuesday.
Among the big concerns — for the industry overall — will be a “short supply” of battery production necessary to meet growing demand, something he forecast will occur around 2024 or 2025. Even as production capacity picks up, the industry still may not be able to meet demand, Tavares added, raising his concerns about “a short supply of (raw) materials,” such as lithium, in 2027 or 2028.
The Stellantis CEO isn’t the only one worried. Its key competitors, including Tesla, General Motors, Ford and Volkswagen, are racing to expand their own battery production, while also lining up new sources of raw materials. Tesla is looking for new mining in places like Nevada. GM has formed a joint venture with a startup that has developed a method for extracting lithium from brine waters found beneath California’s Salton Sea.
There are plenty of other obstacles, Tavares said. For automakers like Stellantis, one of the biggest challenges will be reducing the cost of producing BEVs — currently about 50% more than for vehicles using internal combustion technology.
“The only thing we can do is absorb the additional cost of electrification to protect affordability,” he explained. “We cannot transfer (that higher cost to the customer because if we do that the middle classes will not be able to buy a new car.”
Some of the challenges the industry faces right now aren’t limited to EVs. There is the issue of inflation which is making it difficult for many buyers to afford new vehicles. Then there’s the fear of a recession, a possibility Tavares said “people should be afraid of.” It’s going to take careful stewardship by the U.S. Federal Reserve and other central banks to find a way to bring down inflation, he added, without triggering a recession.
“My god, the world is changing so fast,” Tavares said with clear awe during the nearly hourlong media session. And not every automaker will be able to cope with the coming changes.
“It is a Darwinian world,” he suggested, and it will help divide the industry’s winners and losers.