No one has ever driven a
and it remains likely that no one ever will. The world’s fourth-largest car maker doesn’t seem eager to make a name for itself as yet another brand in its stable of 14. And some of these aren’t short on cachet or name recognition—look at Maserati, Jeep, or Alfa Romeo.
Carlos Tavares, CEO of the company born from the January merger of Italy’s
and France’s Peugeot-PSA, cautions, however, that Stellantis isn’t a “dinosaur” forced into existence by the combination of two old car makers. He insisted during the company’s first analyst meeting at the beginning of the year that he wasn’t presiding over the result of a “crisis merger.”
Known for his unsentimental approach to cost-cutting in his previous incarnations as Renault’s second-in-command, then as Peugeot’s chief, Tavares realizes that the new group won’t grow on savings alone. His two priorities are clear: one is growth in the Chinese market, where neither Fiat nor Peugeot has succeeded so far, but from which Stellantiswill not withdraw. The second is the move to electric vehicles, where both founding groups had until now mostly played catch-up.
Stellantis (ticker: STLA) made its debut on the Paris and Milan stock exchanges on Jan. 18—and in New York a day later—and the stock is up 13% since then, underperforming most of its European peers in those short two months. The Stoxx Europe 600 Automobiles & Parts index is up 18% over the same period.
The stock took a hit this past week because of shortages of semiconductors, which forced the company to announce that it would delay the production of its Ram Classic pickup trucks in its Michigan and Mexico factories. That sent the shares tanking more than 2% on March 23.
Still, there’s reason for long-term optimism. Deutsche Bank analyst Tim Rokossa has a Buy rating on the shares, with a 20 euro target, or 30%-plus upside from its recent price of about €14.19. The CEO is “in an ideal position to combine the strengths” of the merged companies, he writes.
Indeed, few analysts doubt Tavares’ capacity to merge what were at the time the last two family-owned car makers in Europe. As Peugeot CEO, he successfully managed the 2017 acquisition and integration of
’ former European subsidiary Opel into the French group. And the promised €5 billion ($6 billion) of annual cost cuts seem within grasp. About 80% of the targeted annual savings is expected by the end of 2024, according to the company.
The Chinese market and the pivot to electric vehicles will be harder to negotiate without significant investments. Tavares announced an improvement in profitability this year, and the group will benefit in the next couple of years from what might have looked like a weakness two or three years ago: its dependence on the U.S. market—boosted by President Joe Biden’s fiscal stimulus—where three new high-margin Jeep vehicles will come to market. The combined group makes about 60% of its operating profit in the U.S.
Tavares aims for an operating margin of 5.5% to 7.5% this year, up from 5.3% in 2020. Caution is warranted because the continuing spread of Covid-19 in Europe and renewed lockdowns are likely to delay the economic recovery on the Continent.
Tavares has warned that he needs time for a full turnaround, but Stellantis will have several new electric vehicles in 2022 and 2023 to help its planned transition.
Targets on carbon-dioxide emissions are likely to be met once the former Fiat-Chrysler and Peugeot-Citroën vehicles are on joint platforms, Rokossa wrote in a note. Still, the lack of electric vehicles “will limit the multiple that the market is willing to pay for,” he cautioned.