Analysis: Stellantis CEO follows Chinese route to avoid EV tariff 'trap'
26/09/2024 06:00
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Stellantis CEO Carlos Tavares calls tariffs a 'trap'
shielding
legacy automakers
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Stellantis' joint venture with Leapmotor gives access to
Chinese
EV technology
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U.S. and EU have differing strategies on Chinese EVs and
technology
By Nick Carey, Nora Eckert and Joseph White
LONDON/DETROIT, Sept 26 (Reuters) - Stellantis
STLAM.MI wants to adopt the low-cost mindset of Chinese EV
makers despite the European and U.S. tariffs CEO Carlos Tavares
lambasts as anticompetitive, but the world's No. 4 automaker
must navigate trade barriers on both sides of the Atlantic if it
wants to succeed.
Tavares calls tariffs a "trap," arguing they will hurt
legacy automakers by shielding them from the reality that
Chinese rivals make electric vehicles for about a third less.
The best way to compete is instead to "try to be Chinese
ourselves," Tavares said at a Reuters Events conference in
Munich in May.
That belief led Stellantis to purchase a 21% stake in China
EV maker Leapmotor 9863.HK last October, creating a joint
venture giving Stellantis access to Leapmotor technology and
exclusive rights to produce its EVs outside of China.
The challenges faced by Stellantis in the EU and the U.S.
are no different than those confronting all automakers as they
seek to compete with the Chinese globally. However, Stellantis
and a handful of others have taken it a step further,
establishing partnerships with Chinese automakers in order to
stay competitive.
Stellantis is making Leapmotor EVs at its Tychy plant in
Poland alongside models from better-known brands Fiat, Jeep and
Alfa Romeo.
Tavares says Stellantis could make Leapmotor EVs in North
America.
But applying the same strategy in Europe and the U.S. is
difficult because the regions have sharply different approaches
to Chinese EVs and the underlying technology.
Chinese EVs are already on sale in Europe; and factories to
make more are being built - with subsidies from individual
countries competing for plants.
European automakers are embracing Chinese technology.
Volkswagen VOWG_p.DE has bought a stake in China's Xpeng
9868.HK to jointly develop cheaper EVs for the Chinese
market.
Many auto experts see this as a blueprint for future
partnerships.
"We believe many of our competitors will turn to Chinese
companies ... to use their platform globally," Ford F.N CEO
Jim Farley said in July, adding the U.S. automaker will develop
its own core EV technology instead.
Such partnerships are far more challenging in the United
States. The Biden administration has slapped a 100% tariff on
Chinese-made EVs, championed U.S. production through the $430
billion Inflation Reduction Act and targeted Chinese car
components.
The U.S government now proposes barring Chinese software and
hardware from vehicles on American roads, which could be its
most powerful weapon yet to block Chinese EVs.
Stellantis could theoretically produce Leapmotor EVs at U.S.
plants, but with non-Chinese parts and U.S. wages any savings
could be minimal.
The real problem for Stellantis would be political.
For instance, U.S. Republican Senator Marco Rubio and others
have fiercely criticized a planned Ford battery plant in
Michigan using technology licensed from Chinese company CATL
300750.SZ .
Stellantis' contrasting U.S. and European options highlight
differences in trade strategies on both sides of the Atlantic.
Protectionist moves have divided automakers and executives,
with some, like Tavares, rejecting the need for tariffs,
especially German automakers reliant on China for profits.
BMW BMWG.DE CEO Oliver Zipse argues that as China
dominates EV raw materials and components, a trade war would
hurt Europe.
"There is no Green Deal in Europe without resources from
China," Zipse said in May.
But some U.S. automakers favor tariffs.
Ford's Farley says tariffs level the playing field, giving
U.S. automakers a short window to match Chinese rivals' ability
to make cheaper EVs.
Industry observers say regardless of tariffs, China's EV
industry will become a global powerhouse.
'GIVE THEM TIME'
U.S. executives said two European Commission reports
released this year - detailing Chinese government assistance
including direct EV purchase subsidies, cheap corporate loans,
cheap electricity, and cheap or even free land - prove
protection is needed.
Chinese companies dominate raw materials from rare earths to
graphite, undercutting Western rivals on price.
In June, the U.S. government reinstated a 25% tariff on
Chinese artificial and natural graphite.
"As long as the market stays unbalanced ... tariffs should
stay in place," said Chris Burns, CEO of battery materials
company Novonix NVX.AX , which has received $203 million in
U.S. grants and tax credits to scale up synthetic graphite anode
production at a Tennessee plant.
Detroit's automakers also need better EV models to compete,
said Tim Piechowski, portfolio manager at ACR Alpine Capital
Research, a General Motors GM.N investor.
"This (tariffs) does give them time," Piechowski said.
'CARROT AND STICK'
The EU has proposed tariffs of up to 35.3%, but cannot shut
out Chinese automakers because the 27-country bloc has a common
set of rules for members and outsiders to play by.
"The aim is to remain open to competition from China, but on
fair terms," a European Commission spokesperson said.
Andy Palmer, former COO of Nissan and currently chairman of
Slovak battery maker InoBat, part-owned by China's Gotion
High-tech 002074.SZ , said the EU must rely on a "combination
of carrot and stick to bring the Chinese in, so at least they're
making locally."
Stellantis' Tavares says tariffs hurt exports because
protected automakers are under no pressure to lower prices.
"When you get used to protection, it's very difficult to get
rid of," Tavares told Reuters in May.
Stellantis is instead leaning on cheaper models like its
upcoming Citroen e-C3, which will start at 20,000 euros
($21,342), and its Leapmotor EVs to compete.
A number of automakers have backpedaled on electrification
targets, but Stellantis said its targets of 100% EV sales in
Europe and 50% in the U.S. by 2030 remain in place.
Moshiel Biton, CEO of Israeli battery materials company
Addionics, which plans a $400 million U.S. factory for cathode
materials, said legacy automakers must develop better EVs to
compete instead of simply embracing Chinese technology.
"If they just try to do copy and paste, they can't compete
with the Chinese on cost," Biton said. "Innovation is mandatory
or they face a dead end."
(Reporting By Nick Carey in London and Nora Eckert and Joseph
White in Detroit
Editing by Ben Klayman and Matthew Lewis)
((mailto:nick.carey@thomsonreuters.com; +44 7385 414 954;))