Carmaker bets on hybrid models to make electrification accessible to the middle class

03/07/2024

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Carlos Tavares — Foto: Wenderson Araujo/Valor

Stellantis CEO Carlos Tavares concluded that offering only fully electric cars worldwide would make the industry lose most of its customers, who are in the middle class. Therefore, while sticking to decarbonization goals, he has been seeking alternatives to offer a more accessible electrification to that type of consumer. In Brazil, the possibility of using ethanol in hybrid cars led the automaker to decide to invest R$30 billion in the country over the next five years.

That is the largest investment program among all plans announced by automakers in recent weeks. With the Stellantis plan, the total amount announced by light vehicle manufacturers (cars and light commercial vehicles) in Brazil for the current decade reaches R$87.8 billion. Of the total, R$67.2 billion were announced less than three months ago.

The investments announced by Stellantis—a company created three years ago from the combination of Fiat, Chrysler, Peugeot, Citroën, and others—add to the plans by Volkswagen, Toyota, and CAOA Chery, which have expressed that their new investments will back the development of hybrid ethanol cars. General Motors, Renault, Nissan, and Hyundai are expected to follow suit, which Mr. Tavares described as “a smart solution.”

The executive points out that producing a fully electric car today costs between 30% and 40% more. “If we pass this cost on [to consumers], the middle class will say, ‘I can’t buy it,’” he said. “If we ignore the cost, restructuring a company that employs 260,000 people worldwide would be a social disaster,” he added.

Hence, there is a need to seek regional solutions, according to Mr. Tavares. “We have smart solutions like Brazil’s bi-fuel car,” he said. The bi-fuel technology, which allows for the use of ethanol or gasoline, combined with the electrification offered by a hybrid car, contributes to promoting decarbonization at more affordable prices.

“We are witnessing the fragmentation of the world, which is not a good solution for humanity; but that is another story,” he said. The Portuguese executive has led Stellantis from the start. Before that, as the CEO of Peugeot and Citroën, he was already one of the most respected leaders in the industry.

He points out that while Europeans are interested in EVs, Americans are still hesitant. In Brazil, there is the possibility of ethanol. How about the Africans? “How can we find a safe, clean, accessible technology for Africans without turning to biofuels that could compromise food supply?” he questions.

According to the executive, the prices of electric cars could be on par with combustion models from 2026 or 2027. However, he fears that a regionalization of the world could compromise the necessary scale for that to happen.

Mr. Tavares cites what happened recently in Europe, when some governments, including Germany, eliminated subsidies of up to €7,000 for consumers who exchanged their cars for a fully electric model. “The middle class gave up.”

“The consumers’ message was: we can have electric cars, but we need subsidies. Without subsidies there is no volume, without volume, there is no scale, and without scale, we cannot reduce prices. And without volume, there will be no environmental impact. It’s a jammed machine.” The executive notes that countries are indebted and facing high interest rates, and no one wants to hear about tax increases.

But what is the point of offering a hybrid model that runs on ethanol if consumers prefer gasoline? Mr. Tavares says Stellantis already offers cars that run exclusively on ethanol. “But we are just one of the players to make it work.” He suggests greater government participation to promote the biofuel.

Argentina will also receive investments from Stellantis. The amount to be invested in Argentina was not expected to be revealed in the press conference held by the executives on Wednesday (6) in Brasília, shortly after the meeting with the government. However, given the journalists’ insistence in discovering the level of interest the company has in keeping the activities’ pace in the neighboring country, Emanuele Cappellano, CEO of Stellantis Latin America, said Argentina will soon receive investments amounting to R$2 billion.

According to Mr. Cappellano, by 2030, the renewal of products and launch of new cars under Stellantis brands in Brazil will total 40 models. Of this total, 20% will be fully electric cars.

Mr. Tavares came to Brazil to announce the new investment to the government in person. Both during the meeting with President Lula and Vice President Geraldo Alckmin, and later, in the interview with journalists, the executive praised the Mover program, which offers federal tax incentives to the automotive industry in exchange for the commitment to carrying out research, innovation, and reducing emissions.

“It is a very smart program and one of the strengths of the country, which has carried out structural reforms and programs for the industry,” he said.

“Latin America is, for us, a stable region today,” Mr. Tavares said when commenting on the reasons that led the company to announce the robust investment. The previous cycle combining the programs of the brands under Stellantis in Brazil totaled R$16 billion for the 2018-2025 period.

The reporter’s travel costs were covered by Stellantis.

*Por Marli Olmos — Brasília

Source: Valor International

https://valorinternational.globo.com/