Automaker Stellantis to Idle Illinois Plant, Citing Rising Electric Vehicle Production Costs

New vehicles are parked in storage lots near the the Stellantis Detroit Assembly Complex in Detroit, on Oct. 5, 2022. Paul Sancya/AP Photo

Automaker Stellantis will indefinitely idle an assembly plant in Illinois that employs around 1,350 workers, the company said, citing the challenge of rising costs related to the electric vehicle (EV) market and other factors.

The site, which will be idled beginning in February 2023, manufactures the Jeep Cherokee SUV. Stellantis, the parent company of Chrysler, Dodge, and Jeep, said it might not resume operations at the site as it considers alternative options.

The industry “has been adversely affected by a multitude of factors like the ongoing COVID-19 pandemic and the global microchip shortage, but the most impactful challenge is the increasing cost related to the electrification of the automotive market,” Stellantis said in a statement.

Tim Ferguson, shop chairman for United Auto Workers (UAW) union Local 1268, which represents the Illinois plant’s hourly workers, cited company documents to claim that Cherokee production is being shifted to Stellantis’s Toluca plant in Mexico and that the firm intends to close the Belvidere plant.

Amsterdam-based Stellantis insists that it’s looking at repurposing the Illinois facility but didn’t reveal any concrete plans. Cindy Estrada, vice president of UAW, criticized Stellantis for receiving “billions in government incentives” to transition to clean energy while failing to invest that money into “our communities.”

The carmaker had said it plans to invest more than 30 billion euros ($31.6 billion) through 2025 to electrify its vehicle lineup.

While the company expects EVs to make up 100 percent of its sales in Europe by the end of this decade, it only expects electric vehicles to account for 50 percent of sales in the United States.

Rising Costs, Reliability Issues

The cost of EV production rose massively during the COVID-19 pandemic. The average cost of raw materials for an EV came in at $8,255 per vehicle in May 2022, an increase of 144 percent from $3,381 in March 2020, according to global consulting firm AlixPartners.

The cost increase has been driven by materials such as lithium, cobalt, and nickel, which are critical in the manufacture of the rechargeable batteries used in EVs.

Rod Colwell, CEO of Controlled Thermal Resources (R), and Tracy Sizemore, the company's global director of battery materials, walk along geothermal mud pots near the shore of the Salton Sea, where the company mines for lithium, in Niland, Calif., on July 15, 2021. Marcio Jose Sanchez/AP Photo

In the United States, states such as Georgia, Tennessee, South Carolina, and North Carolina have announced plans to incentivize EV production.

Meanwhile, electric vehicles appear to be less reliable than their gas-powered alternatives in the United States.

The Consumer Reports 2022 Annual Auto Reliability survey, which covered 24 auto brands, found that mid-sized or large and gas-powered sedans, as well as hybrid vehicles, were the most reliable vehicles sold in the market.

Owners of electric vehicles reported multiple issues with electric motors, batteries, and charging systems. Tesla, a market leader in EV sales, placed just 19th spot in overall brand rankings.

Reuters contributed to this report.