- Stellantis shares up over 60% in 1st year, beating Tesla
- Company to unveil its business plan on March 1
- Investors expect new strategy for China
Shares of Stellantis, the company formed from the merger of Fiat Chrysler and Peugeot, have far outpaced its U.S. rival in its inaugural year, and if playing catch up with Tesla is what everyone in the auto industry is about then the company has had a good start.
However, this is only the first lap. When Chief Executive Carlos Tavares unveils his detailed business plan on March 1, analysts want to see Stellantis (STLA.MI) making progress in just two areas – fixing its business in China and overcapacity in Europe.
Stellantis’ market value of 59 billion euros ($67 billion) is still just 6% of its U.S. rival’s, despite its shares surging more than 60% since their debut on Jan. 18, 2021 – compared with a 27% gain for Tesla’s (TSLA.O).
Even with a strong first year signaling well, Jefferies analysts have said Tavares has shown vision and ambition with a “sustained stream of strategic initiatives.”
A 30-billion-euro electrification strategy has been mapped out by Tavares, and he has formed alliances with Amazon and iPhone assembler Foxconn, since forging the world’s No. 4 carmaker by production, to accelerate the development of software and semiconductors for future connected vehicles.
To keep streamlining its European operations, he has cut deals with unions and also drawn up plans for five battery plants – side-stepping potential labor conflicts and pushing the company’s operating profit margin up to around 10%.
In the past year, Stellantis’ workforce, excluding former Peugeot-controlled parts maker Faurecia (EPED.PA), was almost unchanged at around 300,000- keeping Tavares’ promise not to cut jobs or close plants following the merger.
All this was achieved despite facing a semiconductor and supply chain crunch that cost global automakers millions of vehicles in lost production last year and is not expected to ease quickly.
By avoiding a “muscular” approach with unions and having the outlines of his strategy in place, Tavares was living up to his reputation as a practical man, Marco Santino, a partner at management consultants Oliver Wyman said. He added:
“The path has been mapped out already, it needs to be consolidated. I don’t expect fireworks from his business plan”.
However, bolder action is needed, many say. For example, the 14 brands of Stellantis – including Jeep, Ram, Citroen, Opel, and Maserati – walk “a fine line between differentiation and internal competition”, Jefferies analysts say.
In the meantime, Tesla is leading the industry transition to an electric and software-driven future with a single brand and a highly focused strategy. Every group aspect, including its brands, are under the microscope some of which analysts have suggested could be eliminated to save money, Tavares has said.
Last year, the 63-year-old said:
“For the time being, we love them all and you cannot kill what you love.”
Adding each brand would be given 10 years to prove itself profitable, he mentioned, “When you love them, you give them a chance.”
Another long-term challenge, as the group enters its second year, is reviving its fortunes in China, the world’s biggest auto market, where Fiat Chrysler and Peugeot-owner PSA had almost negligible market shares.
About his China plans, Tavares has said, “We are now negotiating and changing very many things at core,” without giving details.
The company could look to leverage its strong Jeep and Maserati brands there, Jefferies analysts added. China could also be considered as an export base to the rest of Asia, or to deepen its ties with Foxconn beyond their current joint venture.
“Luckily for Tavares, he’s got time,” Oliver Wyman’s Santino said.
“Investors’ focus is on Europe’s turnaround at the moment. And on that he is delivering”.
($1 = 0.8775 euros)