Italian automaker Stellantis is at risk of losing a large chunk of the U.S. market as its market share plummets due to soaring prices, the country’s automaker's dealers have warned.
Stellantis has aggressively raised prices in the U.S. after being formed in 2021 through the merger of Fiat Chrysler and France’s PSA Group. CEO Tavares’ goal was to increase profits and reduce costs rather than increasing market share.
So far, that gamble hasn't paid off.
Stellantis became the latest automaker to issue a profit warning in September, surprising investors. The company’s stock price has fallen more than 43% since the beginning of the year.
The auto giant has increased prices for its Jeep, Ram and Chrysler brands in the U.S. after strong profits from 2021 to 2023. Equity research group Bernstein said this made Stellantis “overconfident” and it is now paying the price.
Bernstein spoke to Ken Volz, owner of the Volz Auto Group, which includes two Stellantis dealerships, to understand why customers are wary of buying the company’s cars.
Stellantis price
Volz confirmed Stellantis’ name for the $100,000 Jeep Grand Wagoneer and questioned who it was pricing the model for.
“Not everyone can afford a Wagoneer. How many people besides bankers and Manhattanites can afford a $100,000 SUV?” Volz said.
“Connecticut teachers probably don’t have that luxury. So they’re kind of limiting their addressable market."
Volz concluded: All of them are too expensive. ”
Stellantis is working to reduce inventory at its affiliated dealers so that by the end of 2024, their inventory will be below 330,000 units.
The automaker considers itself a premium brand. In other words, it’s a manufacturer that has a USP that drivers are willing to pay a premium to get. But Bernstein analysts don’t think Driver agrees with that proposition.
“Stellantis’ misguided belief in its pricing power is causing it to lose customers to stronger, lower-priced competitors like the Toyota RAV4 and Honda CRV,” write Daniel Loeska and Stephen Reitman. I guessed it after my conversation with Volz.
“Consumers are not paying a premium for Stellantis or are in a position to splurge on higher monthly payments, so the company is not addressing this issue, leading to a loss of market share.”
Bernstein said Stellantis needs to lower prices to regain market share. But once that happens, banks say Stellantis will have a hard time getting its price back up.
Representatives for Stellantis did not respond to requests for comment.
Stellantis mistake
The Equity Research Group’s comments may echo those of Stellantis CEO Carlos Tavares. He blamed “arrogance” for failing to identify three simultaneous mistakes at automakers that led to double-digit sales declines in the United States.
Tavares said Stellantis was too slow to sell its bulging inventories, encountered manufacturing problems and lacked “sophisticated technology to bring to market.”
“When I say we were arrogant, I’m talking about myself and no one else. What I’m talking about is realizing that these three issues are converging and immediately It’s about the fact that we should have acted, and we should have set up a task force to address them,” Tavares said at a Stellantis investor briefing in June.
Mr. Tavares is reportedly planning to overhaul Stellantis’ management structure in a bid to rebuild its fortunes.
Bloomberg previously reported that Stellantis Chairman John Elkann is also looking for a replacement for the 66-year-old Tavares, whose contract ends in 2026.
