(Bloomberg) -- Stellantis NV is willing to drop some of its suppliers and make car parts on its own to lower costs in the expensive shift to electrification.

“When suppliers are not racing at the same speed of our teams, our teams see a big benefit to insource,” Tavares told reporters during a conference call from Melfi in southern Italy. “You come to the conclusion that what you have outsourced, you can do it in-house.”

Carmakers are pressuring suppliers to eke out more cost reductions amid slowing EV demand in Europe where elevated borrowing costs, subdued economic growth and waning subsidies weigh. At the same time, Chinese brands are expanding in the region with cheaper models. BYD Co. plans to offer its Seagull hatchback next year at a price below €20,000 ($21,730).

The company’s suppliers include Valeo SA, which Stellantis last year lauded as keeping a lid on costs. The Fiat and Jeep maker also works with Continental, Magna International, Forvia and Aptiv, among others.  

The company and its partners are also adjusting investment levels for EV batteries to match vehicle demand, the CEO said. Earlier Tuesday, Stellantis’ battery partner Automotive Cell Company SE said it has paused construction at a €2 billion site in Germany to review plans and possibly switch to making lower-cost cells there. 

On Melfi, which makes Jeep and Fiat models, Tavares said productivity and quality had improved. The company has been shedding jobs in the country, though recent talks with Italian unions were “constructive.”

Stellantis supports the Italian government’s target of producing 1 million vehicles locally, provided “there are 1 million buyers for them,” Tavares said.

Still, energy prices in Italy remain “totally uncompetitive,” he said with Stellantis planning to enable Melfi to make its own electricity. 

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