Multinational carmaker Stellantis risks alienating large parts of its US market as price rises cause its market share to plummet, a US dealer of the carmaker has warned.
Stellantis aggressively raised prices in the US after being formed in 2021 through a merger between Fiat Chrysler and France’s PSA Group. CEO Carlos Tavares focused on profits and cost savings instead of increasing market share.
So far the bet has not paid off.
Stellantis spooked investors in September when it became the latest automaker to issue a profit warning. The automaker’s shares have fallen more than 43% in the past year.
The auto giant raised prices for its Jeep, Ram and Chrysler brands in the US thanks to strong profits between 2021 and 2023. According to equity research group Bernstein, this made Stellantis “overconfident” and now the company is paying the price.
Bernstein spoke with Kenn Volz, owner of the Volz Auto Group, which includes two Stellantis dealerships, to understand why customers seemed reluctant to buy his cars.
Stellantis Awards
Wondering who Stellantis would price its models at, Volz checked the name of his $100,000 Jeep Grand Wagoneer.
‘Not everyone can afford a Wagoneer. How many people can afford a $100,000 SUV besides the bankers and the people of Manhattan?” Volz said.
“The teacher in Connecticut probably can’t afford that. So it’s like they’re limiting their addressable market.”
Volz concluded: “They are all nice cars. They are just all too expensive.”
Stellantis is looking to reduce inventory at its partner dealers, in an effort to ensure there are no more than 330,000 at those locations by the end of 2024.
The car manufacturer considers itself a premium brand; in other words, it’s a manufacturer that has a unique selling proposition (USP) for which drivers are willing to pay a premium. However, Bernstein analysts do not think that motorists agree with this statement.
“Stellantis’ misplaced belief in its own pricing power means it is losing customers to lower-priced, high-performance competitors like the Toyota RAV4 or Honda CR-V,” Daniel Roeska and Stephen Reitman surmised after the conversation with Volz.
“Consumers do not grant Stellantis a premium or do not participate [a] position to spend on a higher monthly payment, and the company has not addressed this issue, which has contributed to the loss of market share.”
Bernstein says Stellantis will have to lower prices to regain market share. But once that happens, Bernstein notes, Stellantis will struggle to get prices back up.
A Stellantis representative did not immediately respond to a request for comment.
Stellantis’ mistakes
The equity research group’s comments may echo the thoughts of Stellantis CEO Carlos Tavares, who blamed his “arrogance” for failing to identify three simultaneous mistakes at the automaker that led to double-digit sales declines in the U.S. led.
Tavares said Stellantis was too slow to sell its bloated inventory, ran into production problems and lacked “the way it went to market.”
“When I say we were arrogant, I am talking about myself and no one else. I’m talking about the fact that I should have acted immediately, realizing that the convergence of these three problems was there, and that we had to set up a task force to address them,” Tavares said at Stellantis’ investor day in June.
Tavares is reportedly planning an overhaul of Stellantis’ management structure to revive the automaker’s fortunes.
Stellantis chairman John Elkann is also looking for a successor for the 66-year-old Tavares, whose contract expires in 2026, Bloomberg previously reported.
This story originally appeared on Fortune.com
