The man in charge of one of the world’s largest car-making groups says he remains highly skeptical of the cost-effectiveness of vehicle electrification within this decade.
Sergio Marchionne, president and CEO of Fiat Chrysler Automobiles — also encompassing Jeep, Alfa Romeo, Maserati and Ferrari — has long been a high-profile critic of the economic case for EVs, and remains committed to this line of thinking.
“I remain as skeptical of electrification in this marketplace as I’ve always been,” he told media including CarAdvice at the 2014 Paris motor show.
“I think that the likelihood of electrification being a mainstay of the automotive industry in the next five years is relatively limited and so for us to commit to and openly expose the house to what I consider to be exorbitant capital commitments for an industry that is not yet mature would have been incredibly unwise given the other priorities that we’ve had.”
These priorities include the Marchionne-led turnaround of Fiat’s economic situation and correction of massive structural issues within the company, through the allocation of production, increased proliferation of product offerings targeted at new markets and the acquisition of US brand Chrysler.
His comments come at the same time as most other car-makers continue to push electrification in a big way, either through EVs or plug-in hybrids (the latter is a Volkswagen Group mainstay in particular).
The issue is not that EVs will never happen, nor the FCA cannot make EVs work, said Marchionne. It is that internal combustion still has an upside and remains vastly more cost-effective, and is therefore more rational until the entire automotive framework shifts.
“I think you need to be very, very careful if you think that electrification given its inherent limitations on range will ultimately, especially in a market like the US, effectively displace combustion. It can’t,” he said.
“Because 1), it will never provide the travel distance that you’ll require. Especially if it’s based on what we know today about the storage capabilities of batteries.
“More work needs to go on and we have, and continue to work diligently with our supplier partners to expose us to a variety of technology solutions that effectively allow us to move along on that agenda.
“But to embrace it wholeheartedly and neglecting the benefits of improved combustion systems, when they appear to be the most cost effective way of meeting CO2 objectives I think it would be unwise.
“And so I, we can do all the electrical, electrification exhibitions here on our stands and I can impress the hell out of you about the fact that we can do a variety of things. The question is how commercially viable are those solutions?
“Can you sell enough of them to make money and more importantly, can you make money selling them? And I keep on running into this fundamental economic obstacle of overcoming the cost equation of electrification. You can’t.
“And you can’t unless it is a wholesale change and a fundamental shift in the pricing structure of cars. And I also have no doubt that over time, as the emission standards lower that the whole industry will be forced to shift towards a combination of combustion and electrification and certainly in the case of city cars, perhaps full electrification.
“But that’s going to shift pricing and I think that people are deluding themselves to think that you can continue to buy a car for under 10,000 Euros that will accomplish that in, it won’t happen.”
Marchionne said FCA was quite capable of electrification — the LaFerrari being the prime example — and that it would branch into commercial plug-ins or EVs on a small scale with cars such as its announced Chrysler electrified minivan derivative in the US in 2015.
But any such decisions were only driven by regulatory requirements, in others words the increasingly stringent emissions targets in places such as Europe and California. And these targets, poised to become ever tighter, were a significant problem, said Marchionne.
“…We don’t continue to tighten the reins, the bolts on this thing and keep on making life impossible for the car makers,” he said.
“… I was reminded that there are things that you do in periods of economic expansion and there are things that you don’t do in periods of economic contraction.
“What you don’t do is you don’t throw additional costs to an industry that’s already struggling at a time when it’s trying to find the bottom to the volume side. And we’re doing this now.
“I mean I don’t know how many more examples we need of this. We had two bankruptcies in the US of two car companies. We’ve had significant recaps and recapitalisations on the European side, FCA excluded, which have made you realise the economic conditions that have been plaguing this industry have not drastically improved.
“The profit warning that came out of Ford a couple of days ago should be a pretty strong signal of the fact that things are not well outside of NAFTA (North America). Let’s not delude ourselves into thinking that they are.”