Carlos Tavares (64) has nothing left for banter. To the Stellantisboss has the reputation of being the toughest automobile manager. If Tavares speaks, then plain language. This was also the case on Thursday, when he appeared in front of a small group of German journalists on the sidelines of a congress in Bochum. Among other things, he had brought a message to Elon Musk (51) to the Ruhr area.
Tesla’s boss is “a visionary”, Tavares initially flattered, he has “great respect”. But the Stellantis CEO sees the recent increasing frequency of price reductions by the Californians primarily as: nervousness. “The money doesn’t just fly in anymore. Everyone has to earn their living again.” A development that cost killer Tavares obviously likes. “Elon has now arrived in my world. Welcome.”
Musk fears that he will not be able to keep his promise to investors that sales will grow by 50 percent every year. In order to boost sales, he resorted to price reductions – with severe economic consequences.
Tesla had sold more cars than ever in the first quarter, but accept massive losses in returns. The margin melted from 16 percent in the fourth quarter of 2022 to 11.4 percent. Comment Tavares: “Wow.”
Stellantis itself had achieved a margin of 13 percent for the full year 2022. The group, which includes brands such as Peugeot, Citroën, Fiat, Jeep and Opel, reported no returns for the first quarter of 2023.
“At some point there always comes the moment of truth when you buy market share.”
Carlos Tavares
Europe’s major car companies have so far been not entered into a price war with Tesla
. “What happens when manufacturers with 5, 7, 13 and 15 percent margins go into a price war? The one with the highest margin survives, the one with the lowest margin is the first victim,” Tavares said. Conversely, “there will always be a moment of truth when you buy market shares”.
Tavares now expects high-flyer Musk to get down to earth. “He will not want to lose another five percent return in one fell swoop.” In France, Tesla has already started to raise prices again.
After fat years for the car industry – scarce goods due to a lack of parts, especially semiconductors, had driven prices up – it’s now back to the “basics” of the business. “We’re doing sensible things again. That’s good for the industry.” In any case, Stellantis is ready for an “exciting battle” with Tesla.
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Tavares senses the greater danger elsewhere anyway: He watches the competition with eagle eyes China. Thanks to political support, they can also produce vehicles at low cost and offer them accordingly at low prices. Affordable electric cars are currently in short supply, BYD and Co. could take advantage of this. Stellantis will also launch e-models at prices around 25,000 euros, “we will all be there,” said Tavares. But the decisive factor is who can ultimately make money with it.
“How do we fight against the Chinese competitors?”
“So the crucial question is how do we fight against the Chinese competitors?” It is significantly more expensive to build cars in Europe than in China. Production costs would have to fall by 40 percent over the next five years in order to become competitive again. If Europe does not want to bleed dry as an automotive location, ways must be found not to lose further parts of the value chain. “Otherwise we will become impoverished,” Tavares warned, Europe threatened to become a popular travel destination for the new industrial powers. “In ten years, we will be serving Chinese and American tourists with coffee.”
Tavares rejects trade barriers as a solution to the problems. Protectionism causes “brutal inflation”. Europe has created the competition itself over the past 30 years by relocating production facilities to countries with low labor costs. This has kept prices and the cost of living low. At the same time, countries like China have become so strong.
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As a consequence, Europe must now “accept the competition,” demands the Portuguese. That is the only solution. “We have to work harder again.” Europe needs “less bureaucracy, less technocracy, fewer powerpoints, fewer meetings,” too many resources are wasted on tasks that don’t add value. “So we can work more,” believes Tavares, “by working better.”