AUTOS INDUSTRY
Fiat Chrysler CEO Learning to Love Electric Vehicles
The Wall Street Journal.
Jul 27, 2017
Fiat Chrysler has come full circle on electric vehicles, with its once- skeptical CEO saying Thursday he is now ready to embrace them.
Taking a page from Volvo, Chief Executive Sergio Marchionne said his company’s premium Maserati sports cars will begin introducing electric-engine powered models in two years and that by 2023 more than half of the brand’s cars will be electrified.
“We will effectively switch all of its portfolio to electrification,” Mr. Marchionne said on a conference call with financial analysts.
Fiat Chrysler Automobiles NV joins Toyota Motor Corp, which also has recently signaled a change of heart, as one of the last remaining holdouts among major auto makers who have questioned the viability of electric vehicles. The moves come as EVs account for just a fraction of global auto sales, but as the industry prepares for a ramp-up in demand in the coming decade.
The push into EVs has been hastened by increasingly stringent regulations globally on fuel-economy standards and tailpipe emissions, along with generous government subsidies. That is prompting more auto makers to offer alternatives to gasoline engines.
That trend was highlighted when the U.K. earlier this week said it would ban sales of cars powered by traditional internal-combustion engines altogether by 2040. Earlier this month Sweden’s Volvo, owned by Geely Holding Group of China, said it would only sell partly or wholly electric vehicles by 2019.
Mr. Marchionne’s comments mark a sharp about-face from previous public statements. He has repeatedly questioned consumer demand for EVs, warned they risk turning cars into commodities and lampooned his company’s sole existing EV—the Fiat 500e—as a perennial money loser.
The CEO said battery costs still present a challenge for mass market EVs, but that trouble with diesel-engine technology has made electrification a more attractive path for meeting government-mandated emissions-reduction targets, especially in Europe.
“My aversion to electrification was based on cost issues. What has really made it mandatory is the diesel” problem, Mr. Marchionne said.
Car makers have had to recall millions of diesel-engine powered cars in Europe after they were shown to emit excessive levels of emissions. Volkswagen admitted in 2015 to rigging nearly 11 million diesel engines world-wide to cheat emissions tests and pleaded guilty in 2016 to conspiracy to defraud the U.S. government and U.S. consumers.
FCA has offered an “eco-diesel” engine option on some of its Jeep SUV and Ram pickup trucks in the U.S., but that has come under fire from U.S. regulators who accuse the company of using emissions-defeating technology similar to that deployed by VW. FCA has denied seeking to intentionally subvert emissions regulations.
Mr. Marchionne said recently that FCA would seek to meet tougher fuel-economy targets by introducing gas-electric hybrid engine versions of most Jeep SUVs, a powertrain configuration already available on its new Pacifica minivan. It is unclear if Maserati cars will be equipped with this type of hybrid solution or fully electric engines.
Without a major breakthrough in standard lithium-ion battery technology, Mr. Marchionne said the global market for EVs is likely to be capped by price increases as demand for batteries exceeds manufacturers’ ability to supply them in large volumes as soon as early next decade.
But Toyota this week reported a potentially promising development for more widespread adoption of EVs in mainstream brands. The Japanese auto maker said it is working on commercializing by the early 2020s a so-called solid-state battery, which would clear a major cost hurdle by not needing to be cooled constantly like lithium-ion batteries. It is one of several companies, including German auto-parts supplier Robert Bosch GmbH, which see promise in solid-state battery technology for next-generation EVs.
Mr. Marchionne’s remarks came after FCA reported its most profitable second quarter since Italy’s Fiat first took a stake in bankrupt Chrysler in 2009.
A strong showing from the Maserati division added to the boost FCA got from improved results in Europe, Asia and Latin America. In North America, which accounts for 58% of revenue, sales fell in the quarter and the company shipped 14% fewer cars. Its closely watched net industrial debt level came in at €4.2 billion ($4.9 billion), well above financial analysts’ consensus forecast of €3.71 billion.
Shares of FCA were down 1.6% in afternoon trading on the New York Stock Exchange.
Adjusted operating profit, which strips out one-time items, for the three months ended June 30 rose to €1.87 billion ($2.2 billion) from €1.63 billion. Revenue was little changed at €27.93 billion. Net income more than tripled to €1.16 billion as FCA benefited from tax changes in Brazil.
