Stellantis CEO acknowledges Tesla’s margins impacted as EV maker faces reality check.

Stellantis CEO acknowledges Tesla's margins impacted as EV maker faces reality check.

Stellantis CEO Claims Tesla’s Profitability Declining as it Enters the Real World of Manufacturing and Competition

MILAN, July 26 – In a recent press conference, Stellantis CEO Carlos Tavares made bold claims about the declining profitability of Tesla. According to Tavares, as Tesla has entered the real world of manufacturing and competition, it now faces the same challenges that established automakers like Stellantis have been dealing with for years. With a touch of wry humor, Tavares stated, “They are entering my world, the world of tight pricing, cost competitiveness, and the operational issues that a big company like ours may face.”

Tavares went on to highlight the impact this transition has had on Tesla’s profitability. He stated, “The result of the fact that Tesla is now entering my world is that their profitability moved from more than 17% in the first half of 2022 to 10.5% in the first half of 2023. They were more profitable than Stellantis, now they are less profitable than Stellantis.”

While Tavares acknowledged Tesla’s achievements and the vision of its CEO, Elon Musk, he also pointed out that all automakers, including Tesla, will have to confront growing competition from Chinese electric vehicle (EV) makers in their domestic markets. Tavares expressed, “What has been said by the Tesla CEO, whom I respect totally, is that they prefer growth to profitability. And we’ll see to which extent they will be also challenged by the Chinese.”

The Stellantis CEO suggested that price cuts in response to competition from Chinese EV makers could pose a significant challenge to Tesla. However, Tavares was confident in Stellantis’ ability to weather such a storm. “If we are racing for the bottom in terms of facing the Chinese with price cuts, Tesla will have problems with that strategy before we do because we are more profitable than Tesla,” he added.

In spite of the competitive landscape, Tavares also took the opportunity to highlight Stellantis’ positive financial performance in the first half of 2023. The company, which is the world’s third-largest carmaker by sales, reported a rise in revenue and operating profit, surpassing estimates. Stellantis achieved an adjusted EBIT margin of 14.4%, which remained largely unchanged.

Tavares’ remarks shed light on the complex and ever-evolving automotive industry. While Tesla has undoubtedly disrupted traditional automakers, its foray into mass production and intensifying competition has begun to impact its profitability. The playing field is now more level as established players like Stellantis adapt and respond to the challenges of the market. As Chinese EV makers continue to gain traction and drive competition, it remains to be seen how Tesla will navigate this evolving landscape without compromising its growth or profitability.