After flying start, Stellantis must tackle Tesla and China

A display shows the Stellantis logo at the entrance to the company’s factory in Hordain, France, on July 7, 2021. REUTERS / Pascal Rossignol

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  • Stellantis shares up over 60% in the first year, beating Tesla
  • The company unveils the business plan on March 1st
  • Investors expect new strategy for China

MILAN, January 18 (Reuters) – If everyone in the car industry is about to catch up with Tesla, then Stellantis, the company formed after the merger of Fiat Chrysler and Peugeot, has had a good start – its shares have far surpassed its shares. US rival in its opening year.

But this is only the first round.

Fixing its business in China and overcapacity in Europe are just two areas where analysts want to see Stellantis (STLA.MI) makes progress when CEO Carlos Tavares unveils his detailed business plan on March 1st.

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After all, despite its shares rising by more than 60% since their debut on January 18, 2021 – compared to a 27% gain for Teslas (TSLA.O) – Stellantis’s market value of 59 billion euros ($ 67 billion) is still only 6% of its US rival.

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However, a strong first year bodes well, and Jefferies analysts say Tavares has shown vision and ambition with a “sustained stream of strategic initiatives.”

Since forging the world’s No. 4 automaker after production, Tavares has mapped a € 30 billion electrification strategy and formed alliances with Amazon and iPhone assembler Foxconn to accelerate the development of software and semiconductors for future connected vehicles. Read more

He has also drawn up plans for five battery factories and entered into agreements with trade unions to continue to streamline its European activities – bypassing potential labor disputes and pushing the company’s profit margin up to around 10%.

Excluding the former Peugeot-controlled parts manufacturer Faurecia (EPED.PA), Stellantis ‘workforce was virtually unchanged in the past year at around 300,000 – keeping Tavares’ promise not to lay off jobs or close factories after the merger.

All this despite the fact that they are facing a crisis in the semiconductor and supply chain, which cost global carmakers millions of vehicles in lost production last year and which is not expected to ease quickly.

Marco Santino, a partner at management consultants Oliver Wyman, said Tavares lived up to his reputation as a practical man who avoided a “muscular” approach with unions, and that the contours of his strategy were in place.

“The path has already been mapped, it needs to be consolidated,” he said. “I do not expect fireworks from his business plan”.

CHALLENGES

But many say more courageous action is needed.

Jefferies analysts say, for example, that Stellantis’ 14 brands – including Jeep, Ram, Citroen, Opel and Maserati – go “a fine line between differentiation and internal competition.”

This at a time when Tesla is leading the industry’s transition to an electrical and software driven future with a single brand and a highly focused strategy.

Tavares has said that all aspects of the group are under scrutiny, including its brands, some of which analysts have suggested could be eliminated to save money.

“For now, we love them all, and you can not kill what you love,” the 63-year-old said last year.

“When you love them, you give them a chance,” he said, adding that each brand would have 10 years to prove it is profitable.

As the group enters its second year, another long-term challenge is to revive its fortune in China, the world’s largest car market, where Fiat Chrysler and Peugeot owner PSA had almost insignificant market shares.

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“We are negotiating now and changing a lot of things at the core,” Tavares has said of his China plans without giving details.

Jefferies analysts said the company could look to leverage its strong Jeep and Maserati brands there. It could also consider using China as an export base to the rest of Asia or deepening its ties with Foxconn beyond their current joint venture, they said.

“Luckily for Tavares, he has time,” Oliver Wymans Santino said. “Investors’ focus is on Europe’s turnaround at the moment. And on that he delivers.”

($ 1 = 0.8775 euros)

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Further reporting by Danilo Masoni in Milan, Brenda Goh in Shanghai and Gilles Guillaume in Paris Editing by Mark Potter and Carmel Crimmins

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