Is Stellantis facing its time of reckoning?

Hey, everyone — Quite a few auto brands are underperforming right now but the ones that stick out in my mind are Nissan, VW, and Stellantis.

So — in true CDG fashion — I polled my audience on X to find out which brand they would rather buy from (if they had to). 

Over 20,000 votes came in, and the results were eye-opening: Stellantis brands landed at the bottom of the list — ouch. Not entirely surprising, but it‘s the perfect segue for what I want to talk about today...

—CDG

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At the start of the year, most industry leaders predicted Stellantis would be in for somewhat of a reckoning. And after a lot of operational missteps that left dealers in a cycle of uncompetitive pricing → bloated inventories → rising floorplan costs → declining profitability, (you get it…) the company’s slow decline reached a head.

But now — as we near the end of 2024 — I believe Stellantis has a shot at turning things around in a meaningful way. However — it has a steep climb ahead to regain sales volume as well as dealer trust.

So — how did we get here?

First things first — Stellantis, better known in the U.S. for Chrysler, Dodge, Jeep, and Ram, owns 14 global brands, including European staples Fiat, Alfa Romeo, and Maserati, among many others…

And, over the last few years, the company has taken big steps to move upmarket — positioning itself as a more “premium” brand. This worked out well for the automaker during the height of the COVID pandemic when severe supply shortages caused MSRPs and transaction prices to soar. But…

Issue #1: Stellantis’ pricing strategy no longer made sense as inventory recovered and the affordability crisis reached critical mass. After all, Jeep isn’t Land Rover. When Jeep wants to charge close to $70K for a loaded Grand Cherokee, it doesn’t sit well with consumers.

One stat that jumped out at me: According to Edmunds, even with consumer incentives higher than the industry average — Stellantis had the second highest average car price in the industry, at right under $55,000 as of Q3. Just behind Ford and Lincoln combined.

Issue #2: In addition to high prices — overproduction and reputation damage have plagued Stellantis. And for most of the year, its core U.S. brands held more than double the industry average days’ supply, according to Cox Auto. While October brought sharp declines for Ram and Jeep, their inventory levels still remain uncomfortably high.

Issue #3: Dealer incentives are out of sync with inventory realities. One dealer in Western New York told me he's frustrated over 2024 Jeep Grand Cherokee 4xe models having higher dealer cash than 2023s, making the newer vehicles cheaper. The mismatch, he said, leaves older models stuck on the lot.

One thought bubble: Stellantis’ troubles are not just in the U.S. The company recently recorded a decline in sales in 22 of 28 European car markets, including Italy (-34%) and France (-17%) — its two primary countries. Brands that had steep drop in sales year-over-year, include Fiat which fell 43%, with Citroen (-41%) and Opel/Vauxhall (-24%) not far behind.

Put this all together and dealers — naturally — were/are pissed.

So pissed in fact — that the Stellantis National Dealer Council published an open letter to the public ripping the company, and its CEO Carlos Tavares, to shreds.

The Council blasted the automaker for “reckless short-term decision-making” that prioritized last year’s record profits at the expense of its brands, sales, and dealer profitability. Led by dealer Kevin Farrish, the Council also claims they’ve been sounding the alarm for two years — only to have their warnings ignored.

“The bill has come due,” the Stellantis dealer letter said. “Your attempt at a soft landing on the backs of your employees, your dealers and your suppliers is frankly just wrong.”

And ever since the letter — there’s been a notable shift at Stellantis.

First, the automaker shuffled around its North American leadership. Jeep CEO Antonio Filosa stepped into the role of chief operating officer of Stellantis North America. And so far — dealers like the change. 

Second, Stellantis has also trimmed dealer inventories. Arguably one of the biggest pain points for dealers has been inventory glut. But as of Stellantis’ Q3 earnings, dealer supply shrank by 80,000 units. And Tavares set a year-end target of 330,000 U.S. vehicles, down from 430,000 at the midyear point. 

How is inventory coming down? Three possible (and likely) reasons are temporary production delays, dealers buying fewer cars 👀, and…

Third, the uptick in consumer incentives. Industry-wide, new car incentives for car buyers as a percentage of the average transaction price were 7.7% or ~$3,744. Chrysler, Dodge, Jeep, and Ram – had incentive packages above the industry average, according to Cox Auto. A 180° turn from a spring and summer of tight discounts.

So — how does the company move forward?

At the bare minimum, there are three meaningful changes Stellantis can make to continue turning things around:

1) Strengthen dealer relationships by involving local leadership more in decision-making processes. As long as this is the auto retailing model, Stellantis has to play the game on the field and rely on its franchisees — just as franchisees rely on Stellantis.

2) Avoid a potential overcorrection by staying closely in sync with the dealer body. Now that Stellantis is going aggressive, they'll have to be very nuanced about balancing inventory incentives / retail coupons so that dealers are not caught off guard.

3) Price all new products competitively to generate volume. It’s an old adage — sales cure all. And if the automaker can get sales volume back up, that’ll likely fix all of the downstream damage issues like aging inventory and floor plan costs, which are key challenges for Stellantis dealers.

What do you think the future holds for Stellantis? Hit reply to tell me more.

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Looking to hire? Add your roles today—it’s 100% free.

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Thanks for reading. See you on the next edition…

—Car Dealership Guy

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