Carlos Tavares is an unashamed petrolhead, with a rally-racing hobby that harks back to an earlier automotive age. Yet carmakers like Stellantis, which he leads, and its rivals have had to set aside affection for roaring internal combustion engines as environmental rules set the limits for the industry.
Stellantis was formed in January in a €50bn (£43bn) merger between France’s Peugeot and Italian-American Fiat Chrysler, in one of the clearest responses to the Tesla-driven electric revolution: the merger will allow them to share expensive investments in battery technology.
It is the era-defining challenge for the automotive industry. The nerve-racking wait for an investment decision at Stellantis’s Ellesmere Port factory, home of the Vauxhall Astra family car, is an early example of the difficulties it will cause for auto companies having to reinvent their businesses – not to mention workers still manufacturing fossil fuel vehicles.
Carmakers are known for being both footloose and ruthless when choosing factory locations, playing off countries against each other in search of the best deal, weighing up anything that might shave fractions of a percentage point off margins. Tavares made it clear that Ellesmere Port faced the added difficulties of Brexit and the UK’s 2030 ban on fossil fuel cars.
The Brexit issue was, for the most part, resolved by the Christmas Eve agreement that secured tariff-free UK-EU trade. However, the 2030 ban has forced on to the agenda a bigger issue: whether Ellesmere Port would be upgraded from fossil fuel car production to the new electric era. A decision was expected imminently at time of publication.
Yet for all the posturing, similar decisions will become common as Stellantis gradually leaves fossil fuels behind. Peugeot under Tavares was already on its way. It avoided EU emissions fines in 2020 by introducing plug-in hybrids and smaller electric cars like the Vauxhall Corsa-e and the Peugeot e-208, as well as cutting traditional internal combustion emissions.
Its merger partner will have to learn to copy quickly. Fiat Chrysler only avoided fines by paying Tesla hundreds of millions of euros to borrow its zero-emissions credits. The Fiat 500 Electric may be promising, but otherwise it is far behind, particularly with gas-guzzling US-focused brands like Dodge and Jeep.
Stellantis’s financial results, reported on Wednesday, will still observe the same division between the separate Fiat Chrysler and Peugeot arms. A detailed strategy update – outlining how the brands will share parts and designs, for instance – is not expected until April.
However, the earnings expectations Stellantis reveals on Wednesday will give an idea of the constraints it will face. The outlook for the 2021 sales recovery as the pandemic eases will be key, according to analysts at UBS. They believe Stellantis will expand revenues by 12% this year, and grow profits more quickly than other traditional carmakers.
Philippe Houchois, an analyst at investment bank Jefferies, argues that the winners among legacy carmakers will be those who can most adroitly manage the decline of their internal combustion engine assets. Tavares’s disciplined leadership should allow Stellantis to come out ahead of rivals, Houchois suggested in a recent note to clients.
Doing so will mean a barrage of new electrified models from Stellantis as it plays catch-up – and more nervous times ahead for employees at factories that have not yet been upgraded to the electric era.
Read More: Old-school Stellantis car factories gear up for the shock of electric | Automotive industry