Tavares Muses About Customers Being Priced Out of Market

No one reading this should be surprised by the news it’s more expensive than ever to find one’s way into a new car. All kinds of external forces have driven average purchase prices through the roof, and strife halfway around the world is currently playing a role in driving up the cost of fuel.

CEOs of the world’s automotive companies have taken note, of course. Late last week, during a virtual roundtable discussion with industry wonks, Stellantis boss Carlos Tavares expressed his opinions on the matter – and spoke of his concerns.

According to The Detroit Bureau, Tavares says he is very concerned “about the effect of affordability” as it relates to the auto industry, going on to opine how the situation may worsen as inflationary pressures escalate around the globe. Production cuts, which began two years ago when factories temporarily shuttered at the beginning of the pandemic but were then acerbated by a lack of semiconductor chips and other supply chain problems, have created severe inventory shortages – an issue whose impact on affordability has been covered multiple times on these digital pages.

An interesting stat tossed out by Tavares was the estimation that there are barely 1 million vehicles sitting in worldwide dealer inventory as this is being written in early March. That’s about one-third of what’s considered normal for this time of year, apparently. We’ve reached out to a few dealer contacts to gauge the accuracy of this estimation in this neck of the woods. To be sure, most lots around these parts are emptier than a politician’s soul.

The explosion of cost for raw materials also doesn’t help. Aluminum has apparently jumped about $1,000 per ton since just before Christmas, and per-ton nickel prices have reportedly increased by approximately 10 grand in the last few months. These essentials are used in bulk for vehicle production – and have no small impact on thwarting the efforts of an OEM to achieve EV price parity with gasoline-powered vehicles. The latter was referenced by Tavares during last week’s roundtable, in which he explained car companies will need to fandangle their way through creative cost containment so these price hikes are not wholly passed on to customers. Doing so, he said, would create a market in which “the middle classes would not be able to buy new cars.”

Yikes.

Suffice it to say those at the helm of car manufacturers don’t expect this tough situation to ease up any time soon. In a separate conversation late last month, Tavares also said he expects Stellantis suppliers to eat some of these costs in an effort to prevent runaway prices on EVs, saying the current climate should provide “ a very nice Darwinian transition period” for suppliers and OEMs.

[Image: Stellantis]