Stellantis chief executive Carlos Tavares has expressed concerns over the growing transaction prices of new vehicles.
In October last year, the average new car price in the U.S. topped $45,000 for the first time and this figure has continued to rise, hitting more than $47,000 in December. What’s more, more than 80 percent of new car buyers are paying dealer markups.
While speaking during a Zoom call with a number of publications, including The Detroit Bureau, Tavares said he was concerned with the trend.
“I am very concerned about the effect of affordability,” he said, adding it is “becoming much more of an issue as inflationary pressures escalate.”
Tavares explained a number of factors that have caused new car prices to rise so rapidly. For starters, the ongoing semiconductor shortage continues to impact the automotive industry and has led to production cuts. In addition, raw material costs are rising and have jumped further in recent weeks following the ongoing war in Ukraine, in particular the prices of steel, aluminum, and nickel.
Stellantis’ boss noted that while the company has significant electric vehicle plans, its EVs will continue to cost more than equivalent ICE-powered models for the near to midterm. Tavares acknowledged that the company cannot pass these increases on to consumers noting that “the middle classes would not be able to buy new cars,” if it did. Instead, Stellantis needs to find new cost-cutting ways.
One area where Stellantis is looking to save money is through marketing and its distribution system. Tavares said that its marketing and distribution system accounts for roughly 30 percent of the price of a new vehicle. He added that Stellantis will also need to work around different franchise laws across the United States and overseas markets.
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