Stellantis to deepen cost cuts to fend off Chinese carmakers’ ‘invasion’ in Europe

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Stellantis is prepared to deepen cost cuts and squeeze suppliers further to compete with an “invasion’” of Chinese carmakers producing electric vehicles more cheaply, the Peugeot maker’s chief executive has said.

The group, which makes Jeep cars in the US and also owns the Fiat and Citroën brands in Europe, on Wednesday posted record first-half revenues of €98bn, helped largely by higher shipments, as profits also rose.

But the carmaker’s chief executive Carlos Tavares, who has long had a nickname as “le cost-killer” in the industry, said he would redouble efforts on finding savings to protect margins and compete with rivals.

“We’re facing an incredibly brutal scenario. On the one hand, we’re supposed to compete with Chinese rivals which are 25 per cent less expensive. On the other hand, we’re told to make do with the extra 40 per cent in costs driven by the electrification of cars,” Tavares told reporters.

Earlier, in an interview with France Inter radio, Tavares described the looming push by Chinese carmakers overseas as an invasion and an “extremely powerful offensive”.

Delivering affordable electric cars has become a major concern for economies worldwide as the shift towards cleaner vehicles has so far led to high prices.

Like rivals in Europe and elsewhere, Stellantis, formed by the merger between France’s PSA and Italy’s Fiat Chrysler in 2021, also faces pressure from Tesla as the US electric-car maker slices its prices, even to the detriment of its margins.

Tavares did not put a number on additional cost cuts but said these could be found in factories as well as by getting better deals from suppliers on components. In the US, Stellantis has already offered voluntary severance packages to thousands of employees.

By 2030, Stellantis aims for all new car sales in Europe to be electric, and on a global basis for battery-powered vehicles to account for more than half its revenue, compared with 3 per cent in 2021.

For the first six months of 2023, sales rose by a better than expected 12 per cent, and its adjusted operating income was up 11 per cent to €14.1bn, with operating margins at 14.4 per cent compared with 14.5 per cent a year earlier.

Stellantis said sales of electric cars were up 28 per cent year on year, by number of cars sold. The company’s Milan-listed shares were up 1.5 per cent in early afternoon trading on Wednesday.

In a swipe at French finance minister Bruno Le Maire, who had asked the Franco-Italian group to show some “economic patriotism” and consider building more of its electric car models in France, Tavares said that “countries with relatively high cost structures are also asking you to manufacture small cars on their soil” as he listed looming pressures.

Tavares has said that Stellantis would not move production of its electric Peugeot 208 cars from Spain to France.