Major US and European auto manufacturers are feeling the pressure from Chinese competitors to cut electric vehicle (EV) costs to match those of fossil-fuel models.
Lower-cost Chinese EVs have intensified competition, prompting European automakers to develop more affordable models.
And in the US, legacy automakers like Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) have faced losses in EV production. Ford reported a loss of $4.7 billion in EVs last year, while GM aims for profitability in the second half of this year.
The notable exception here is Tesla Inc (NASDAQ:TSLA, ETR:TL0), a non-union EV maker, which has achieved profitability,
Stellantis NV (NYSE:STLA, EPA:STLA), which has been selling EVs in Europe, will introduce its first EVs to the US market this year.
In its most recent earnings release, Stellantis, the parent company of iconic brands like Alfa Romeo, Chrysler, Dodge, and Fiat, reported record annual net revenue of €189.5 billion while reaffirming its plan to launch 18 additional Battery Electric Vehicles (BEVs) by the end of 2024.
Stellantis CEO Carlos Tavares emphasized the challenge of balancing increased EV sales with maintaining profit margins. While EVs are profitable, they are not as profitable as traditional gas-powered vehicles yet, but the company is working to close that gap.
"If I were a short-termist, I could immediately increase my sales of electric vehicles simply by letting the margins slide," Stellantis CEO Carlos Tavares told reporters.
Tavares highlighted the importance of falling battery costs in narrowing the margin gap between electric and fossil-fuel models. To that end, Stellantis has introduced the Citroen e-C3 SUV, aimed at the affordable EV market at a price of around US$21,000.
The reduction in raw material costs for batteries is expected to help all automakers bring EV production costs in line with gas-powered vehicles. Tavares emphasized the importance of clean energy and a dense public charging network to address range anxiety and improve EV adoption.
“We are working very, very hard to bring the profit margins of electrified vehicles to the same level as ICEs,” he said. “We are not there yet. But we are getting closer.”
And so the race to secure lithium for electric vehicle battery manufacturing is already heating up.
In September 2023, Stellantis announced a strategic investment of approximately $90 million into Canadian junior Argentina Lithium & Energy Corp (TSX-V:LIT, OTCQX:LILIF), which boasts a portfolio of assets in Argentina’s Lithium Triangle.
Stellantis will receive up to 15,000 tonnes of lithium annually over an initial seven-year period.
The agreement to supply lithium for electric vehicle batteries reflects a forward-thinking approach, addressing the imminent lithium demand surge driven by the rapid transition to electric vehicles.
Despite a perceived pullback in the lithium market, Stellantis' CEO Carlos Tavares' remarks indicate strong demand and growth potential in the lithium space, Argentina Lithium CEO Nikolaos Cacos told Proactive.
“I would argue that there is a disconnect between the lithium market and what these end users of lithium perceive,” Cacos said.
“Mr Tavares’ comments attest that the price of EVs are set to come down considerably setting the stage for increased sales and an increasing demand for lithium.”
Cacos told Proactive that the company is still bullish on lithium, as it sees “smart” or institutional money continue to position their investment in this space at this “opportune” time.
Tavares' statement suggests that as the price of EVs decreases, there will likely be increased sales, driving up demand for lithium, a key component in EV batteries.
Unlike some rivals, Stellantis is committed to maintaining full speed on EV production.
Its perspective highlights the disconnect between market sentiment and the actual demand dynamics in the lithium industry.