Future Stellantis CEO says PSA is not investing in internal combustion engines

Carlos Tavares, CEO of French automaker Groupe PSA and future head of its merger with Fiat Chrysler Automobiles NV, says the parent of Peugeot, Citroën and Opel vehicles is no longer spending on internal combustion engine programs.

"That's clear," Tavares said on the subject during the Reuters Automotive Summit teleconference. "We are not investing more."

The company is adapting to the likely reality of the European Union banning the sale of new vehicles with internal combustion engines sometime between 2030 and 2040, said the soon-to-be CEO of the tie-up Stellantis, though Europe isn't the only place looking to do so. California Gov. Gavin Newsom has ordered the end of new-vehicle sales with traditional powertrains by 2035. West Coast Democrats have made a similar national proposal in Congress.

"The point is ... how much time you give the industry to adapt to this situation and how much time you give the industry to train people to different jobs or readjust their company to this different reality," Tavares said. "The shorter the time we do have, the more brutal it will be, and the more social consequences it will have."

In order for the alternative electric vehicles to be profitable, automakers need to cut back, because battery-electric technologies are more expensive than their traditional counterparts, Tavares said.

"Either we sell the cars at the right pricing to protect the margins, and we lose part of the middle class that cannot afford these kind of products, or we compensate for the incentives of the government when the governments don't, and then we sell the cars in the red," he said. "In both cases, either we lose a significant amount of our customers or we sell in red ink.

"The only way to step out of this process is by an accelerated pace of cost reduction, generating a very significant cost reduction for the cost of technology, that will protect the affordability while being zero-emission mobility. That's a very difficult situation."

The resulting impact of the costs for research-and-development and capital expenditures across a large volume basis is that some automakers will face regulatory penalties or financial challenges, Tavares said, leading to consolidation in the industry. PSA is far ahead in meeting European Union CO2 emission targets, he said, but it is combining with Fiat Chrysler to help with the strain on funding the new technology. The deal is expected to close in March.

“Only the most agile with a Darwinian spirit will survive,” Tavares said. "I think we will be able to adapt to that. We have demonstrated enough agility and Darwinian spirit to adapt to that."

bnoble@detroitnews.com

Twitter: @BreanaCNoble