Why France’s top car maker envies Tesla

Tesla vehicles charge at a station in Emeryville, California. AP

Elon Musk got the red-carpet treatment when the Tesla chief executive visited France in mid-May. A Model X drove Musk right up to the Elysee Palace for a meeting with President Emmanuel Macron, who tried talking the chief executive into setting up shop in the country.

Musk was then whisked away to the Palace of Versailles, where he was the star guest among 200 business leaders invited to discuss new investments. Finance Minister Bruno Le Maire snapped a selfie with the billionaire and posted it on LinkedIn with the hashtag #ChooseFrance.

This seems to have irked Carlos Tavares, the chief executive of Stellantis NV, France’s leading car maker. The Portuguese has had a chillier relationship with Le Maire, clashing with him over plans to expand production in lower-cost countries.

Tavares’s warnings about the influx of cheap Chinese cars, and concerns about Tesla rival BYD also being warmly welcomed as it mulls European factories, apparently have fallen on deaf ears.

On Wednesday, Le Maire called for Tavares to show some “economic patriotism” and follow arch rival Renault in producing a small electric car in France. The chief executive hit back before the day’s end, reiterating his view that car makers without legacy combustion-engine assets are getting favourable treatment relative to companies that have made greater contributions to the wealth of western Europe.

“There is no reason why we should take an additional risk by making compact cars in a high-cost country,” Tavares told reporters during a conference call. “If the country is trying to attract newcomers with the investments of new plants, please ask them to take that risk.”

The reasons these are touchy subjects for Tavares are clear: it all boils down to the cost and complexity of shifting to EVs.

The chief executive is overseeing a sprawling empire of 14 brands and dozens of factories around the world, many of which will need to be retooled. He’s embarked on the overhaul by taking stringent cost-cutting measures at a time when governments are trying to protect jobs.

Unions have griped that Stellantis isn’t investing enough in maintaining factories, citing clogged toilets and unmown grass.

Looming large behind the squabbles is the realisation that the EV shift will require significantly fewer workers, and the concern that those “newcomers” will make matters all the more challenging.

Tesla has already set up shop in Germany and is selling the region’s most popular EV, the Model Y sport utility vehicle. BYD, which is backed by Warren Buffett’s Berkshire Hathaway, has used a vertical-integration strategy — it makes its own batteries and semiconductors — to lower costs and cut prices.

Both companies set sales records in the second quarter, likely widening their lead as the world’s top EV makers.

To counter the threat, Stellantis showed off two new EVs in Italy this week. Chairman John Elkann presented the Fiat 600 compact SUV that starts at €35,950 ($39,130) and the Fiat Topolino quadricycle priced from only €9,890.

While Stellantis staged the event at a historic former Fiat factory in Turin, it will build these models in Poland and Morocco. Last month, Italy’s Industry Minister Adolfo Urso complained Stellantis wasn’t producing enough cars in Italy and said the country had room for a second major auto maker. He and Tavares are scheduled to meet on Monday.

It’s a similar picture in France. Stellantis has pledged to make a dozen EVs in the country but they’re mostly larger, higher-end models such as the e-308 sedan and e-408 crossover.

Le Maire wants Stellantis to expand production of the electric version of the compact Peugeot 208, one of Europe’s best-selling cars, in France to retain jobs and help counter inflation.

Bloomberg reported in April that Stellantis instead was leaning towards Spain, where its Zaragoza plant already makes smaller models such as the Opel Corsa.

The country is among those to have become more competitive for EV manufacturing investment because of favourable tax conditions and relatively low expenses for labour and energy.

While Stellantis is moving ahead with plans to step up production of e-208s in Spain, talks with the French government are continuing.

Eastern and southern Europe “are much more low-cost than the north-western part,” Tavares told reporters on Wednesday. “I have the responsibility to make reasonable decisions today that will not impact negatively the future of the company a few years down the road.”