Biplab Das 
Stellantis NV is contemplating a strategic shift to in-house component production to reduce costs in its transition to electric vehicles (EVs). CEO Carlos Tavares highlighted the potential benefits of this move during a recent conference call from Melfi, southern Italy.
Pressuring suppliers for cost efficiency
Carmakers are currently pressuring suppliers to achieve more cost reductions due to slowing EV demand in Europe. High borrowing costs, sluggish economic growth, and diminishing subsidies have negatively impacted EV sales in the region. Additionally, Chinese brands like BYD Co. are entering the market with competitively priced models, such as the Seagull hatchback, expected to be priced below €20,000 ($21,730) next year.
“When suppliers do not match our team’s pace, we find significant benefits in bringing production in-house,” Tavares stated. He suggested that if outsourced production does not meet the required speed and efficiency, it might be more beneficial for Stellantis to handle it internally.
Current supplier relations
Stellantis currently sources components from several major suppliers, including Valeo SA, Continental AG, Magna International Inc., Forvia SE, and Aptiv Plc. Despite acknowledging the cost management efforts of suppliers like Valeo last year, the company is reassessing these relationships to enhance cost efficiency further.
Adjusting EV battery investments
Stellantis and its partners are also realigning their investments in EV batteries to correspond with vehicle demand. Earlier, Stellantis and Mercedes-Benz Group AG’s battery venture, Automotive Cell Company, announced a pause in the construction of a EUR 2 billion plant in Germany. This pause is to review plans and potentially switch to manufacturing lower-cost cells at the site. This move reflects the need to adapt investment strategies to match the current market conditions and demand for EVs.
Enhancements at Melfi plant
Tavares highlighted significant improvements in productivity and quality at the Melfi plant, which produces Jeep and Fiat models. While Stellantis has been reducing its workforce in Italy, Tavares described recent negotiations with Italian unions as “constructive.” The company supports the Italian government’s goal of producing 1 million vehicles locally, provided there is sufficient demand. “We support the target of producing 1 million vehicles locally, as long as there are 1 million buyers for them,” Tavares said.
Addressing energy costs
One of the significant challenges Stellantis faces in Italy is the high energy prices, which Tavares described as “totally uncompetitive.” To mitigate this, Stellantis plans to enable the Melfi plant to generate its own electricity. This move aims to reduce operational costs and improve competitiveness in the region.
The strategic shift: why now?
The shift towards in-house production of vehicle components by Stellantis appears to be driven by the need for greater control over production costs and supply chain efficiency amidst the broader industry shift to electrification. As EV demand fluctuates and competition from cost-effective Chinese models increases, maintaining a competitive edge is crucial for Stellantis. By internalising component production, Stellantis aims to better manage costs, streamline operations, and enhance its responsiveness to market changes.
Stellantis is navigating the complex landscape of the EV market by considering strategic shifts in production and supplier relations. The company’s focus on cost efficiency, adaptation to market demands, and improvements in operational productivity highlights its commitment to maintaining competitiveness during the industry’s electrification transition. The decision to potentially produce components in-house reflects a broader strategy to enhance control over production processes and manage costs more effectively in a challenging market environment.
