Stellantis NV (NYSE: STLA) identified a significant rationale for its merger with Peugeot, a French manufacturer, and Fiat-Chrysler, a U.S.-Italian conglomerate, five months into its existence: developing lucrative electric vehicles.
EVs have been questioned by industry pundits for decades. Until recently, car customers were wary about battery-powered vehicles, regulators were hesitant, and the EV value chain — from battery manufacturers to charging stations — moved slowly.
Most analysts, on the other hand, believe the EV market will grow significantly this decade, owing to improved EV offerings on dealer lots, significant industry investment, and increased governmental pressure, including potential restrictions on conventionally fuelled vehicles.
The question now is whether or not established automakers can make a profit offering zero-emission vehicles. Investors aren’t convinced, as Stellantis stock dropped more than 3% on Thursday after the company unveiled an aggressive EV plan.
Also see: Stellantis’ $35.5 billion plan is aimed at electric vehicles: What Investors Should Know About What Took Place: According to Stellantis, three things must happen in order for the project to succeed:
The company must slash battery prices by 40% over the next four years, and another 20% after that; it must cut expenses across the board; and billions in anticipated “synergies” from the Stellantis merger, which will eventually integrate 14 brands, must materialize.
To yet, profitable electric car production has eluded the world’s automakers. Tesla Inc. (NASDAQ: TSLA) took several years to record a full financial year of losses. Because U.S. vehicles were so far out of compliance, Stellantis’ Chrysler company has long purchased credits from Tesla and others to meet emissions rules.
Carlos Taveras, the CEO of Stellantis, has committed to reporting double-digit operating margins by the middle of the decade. This ambitious goal involves a pledge to invest $35 billion in electric vehicle technology, with the majority of the funds coming from Stellantis’ bank sheet. “It’s fair to say there’s an execution risk,” Taveras said, “but we don’t see any reason” Stellantis won’t succeed.
In 2022, the business said that it will stop purchasing emissions compliance credits from Tesla and other companies. Peugeot’s margins on EVs and conventional cars are already “parity,” according to executives.
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