Multinational automotive manufacturer Stellantis plans to re-evaluate its manufacturing operations in the UK as CEO Carlos Tavares has pointed out that a climate policy is detrimental to the company’s business.
The government’s zero emission vehicle mandate, which sets electric-car production targets for manufacturers, is negatively impacting Stellantis’ financial performance, Morningstar quoted Tavares as saying.
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The company operates two UK factories dedicated to the production of battery-electric vehicles (BEVs), which incur higher production costs compared to traditional vehicles.
“I have decided to trigger a strategic review of our business model in the UK, because we cannot be making BEVs in the UK and be victims of the ZEV mandate,” Tavares said.
“This is a contradiction that the company cannot accept.”
The CEO mentioned that Stellantis has engaged in extensive discussions with the UK Government regarding the policy.
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By GlobalData“So far we don’t have the answers we need,” Tavares commented. “We’ll see what comes next.”
Last month, Stellantis UK’s leader MariaGrazia Davino echoed similar sentiments at the SMMT International Summit, highlighting the potential cessation of UK production due to the ZEV mandate set to take effect in January 2024.
The company’s financial results further underscore the urgency of the situation. Stellantis reported a significant drop in net profit for the first half of the year, with a 48% decrease compared to the same period in 2023.
Revenue also saw a 14% decline, with the company’s performance particularly affected by market downturns in Europe and North America.
Stellantis’ adjusted operating income for the first half of the year also fell sharply, despite cost reductions in workforce, materials, and logistics.
The disappointing financial outcomes are attributed to reduced volumes and product mix, inventory reduction efforts, and mild production disruptions due to a generational portfolio change. Stellantis has also experienced a decline in its North American market share.
In light of these challenges, Tavares has indicated that Stellantis is prepared to take decisive action to improve margins and manage high inventory in its US operations, including the potential discontinuation of underperforming brands.
This marks a shift in Tavares’s stance since the creation of Stellantis in 2021, when he affirmed the future of all 14 brands within the company’s portfolio.
