The EV game plan must leverage our internal combustion business

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European automaker Stellantis (formerly Fiat Chrysler Automobiles) saw the writing on the wall.

The automaker that includes brands like Jeep, Dodge, Peugeot, Fiat and Alfa Romeo lagged competitors like GM (GM), Ford (F) and Volkswagen (VWAGY) when it came to announcing new big plans for an EV transformation that is strictly in the automotive world.

Stellantis (STLA) decided it was time to catch up, and with that, the company unveiled its “Dare Forward 2030” plan during its strategy day earlier this week. Among other things, the company wants to achieve by 2030:

  • Global BEV (battery electric vehicle) sales of five million units, reaching 100% of passenger car BEV sales in Europe and 50% of passenger cars and light trucks in the United States

  • Introducing 75 BEVs, “including the launch of the first Jeep-branded 100% battery-electric SUV in early 2023, followed by the Ram ProMaster BEV later in 2023 and the Ram 1500 BEV pickup truck in 2024”

  • Double global net income to 300 billion euros

  • Reduce carbon emissions by 50% (and go to net zero carbon by 2038)

These targets are essentially in line with what other global competitors of automakers are planning. On the company’s Electric Vehicle Day in July 2021, the company announced that it would spend $35.5 billion, or €30 billion, by the end of 2025 to expand its electric vehicle offerings. . Stellantis has not revealed any additional new funding to complete its Dare Forward 2030 initiative.

But with rivals like Ford aggressively changing their business model this week, separating its ICE (internal combustion engine) business from the blockbuster EV business (and increasing EV spending to an astonishing $50 billion from $30 billion by 2026), the question remains whether Stellantis is doing enough to compete in the EV space.

Yahoo Finance had the opportunity to speak to Stellantis CEO Carlos Tavares in an intimate meeting this week.

Carlos Tavares Chairman of the management board of the PSA group and CEO of Stellantis, Carlos Tavares answers questions from journalists after a private visit to the factory of the Dutch multinational automobile company Stellantis, which is part of the PSA group, in Douvrin, on July 2, 2021. ( Photo by DENIS CHARLET/AFP) (Photo by DENIS CHARLET/AFP via Getty Images)

Two big pillars

While many manufacturers are going full-throttle in the transformation of electric vehicles, Tavares says the key to change lies in “the two main pillars” of electrification and software, which is very new for traditional automakers, but in areas in which they must invest to be competitive.

Tavares is realistic, however, and doesn’t discount the value of the old ICE (internal combustion engine) business.

“It is absolutely true that we finance the investments for electrification with the money coming from the [ICE business]“, says Tavares. “It is absolutely true. This is exactly what we want, which is why we can put $35 billion on the table.”

Automakers need to be smart, according to Tavares, because to make changes the industry needs to consider the costs, not just to automakers, but to middle-class car buyers around the world. And that means replacing older, dirtier cars with newer vehicles that can still use gasoline engines but emit less than half the pollutants and cost far less than electric vehicles at the moment.

The compromise in this regard is a position for Tavares. The other position, where fossil fuels are completely banned, is not yet something Tavares is willing to accept.

“Dogmatism has taken the lead, rather than thinking and looking at what is the best deal for society,” Tavares said. “The number of electric vehicles you are going to be able to sell largely depends on the household income of people who can pay a higher price for electric vehicles… The problem of global warming is limited by household income per capita, which then if you don’t supplement this strategy with a strategy where you remove the wrecks from the road and replace them with modern vehicles, even if they are less electrified, but keep them affordable, then you are missing something. “

Ford’s big bet was “very well done”

Regarding Ford and CEO Jim Farley’s huge gamble to split the company into two units – EV, and everything else like the ICE business – Tavares made no secret of his cynicism, seeing it as a decision that wasn’t just about Ford’s transformation.

“[Ford’s move] was very well received by the market. Very well, very well played. It was a good play,” he says. Tavares continues: “Historic automakers have created wealth over the last century. And suddenly, the fact that they are inherited is a penalty for them, because they have more constraints to move than the other guys, so that’s fine. We’ll stop thinking about that. And we’re going to start moving. But then the society we operate in has to accept that when the auto industry kicks in too quickly, if there’s any sort of collateral damage to lead, it’s because we have to move.”

The collateral damage here is what happens to suppliers, dealer networks, and even service providers who aren’t equipped or don’t know how to adapt to an EV future. Tavares says governments and NGOs want automakers to switch to electrification immediately, but don’t want them to “create a mess” when the electric reality finally arrives.

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Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on instagram.

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