Stellantis had mixed results in 2022. On the one hand, it managed to increase its operating margin by 1.2 percentage points between 2021 and 2022, becoming one of the most profitable automakers in the world. On the other hand, the company is selling fewer cars. This not only applies to 2021 when the merger took place, but also compared to previous years for brands under the Stellantis umbrella.
I conducted my own research on the combined sales of the former FCA (including the former Fiat Group and Chrysler Group ), former PSA, and Opel/Vauxhall brands, which have seen their lowest level since at least 1996. The results are quite interesting.
All of the groups that currently form Stellantis have seen their global volumes drop. This trend confirms the impact of many mergers: becoming more competitive by cutting costs and, in many cases, selling fewer cars due to potential funnel.
Stellantis sold 5.84 million vehicles worldwide last year. It was the fourth largest automaker behind Toyota, Volkswagen, and Hyundai Group with Kia. In addition to its strong position in Europe and North America, it has consolidated itself as the leading manufacturer in Latin America. However, it continues to play a marginal role in Asia, the world's most important automotive market.
The 2022 volume is at odds with what these groups were selling separately years ago, pre-Stellantis. In fact, it represents only 58 percent of the peak sales recorded in 2007, when the groups together sold 10.04 million units. In other words, sales have dropped a whopping 42 percent in 15 years. Conversely, Volkswagen Group's volume increased from 6.2 million units in 2007 to 8.3 million units last year.
Less Costs, More Margins
The primary goal of a merger is to increase profitability while saving money through cost reduction. Instead of spending billions on developing one model, you can spend half that on developing two or more models. Platform sharing and ultimately software development are just two of the many benefits of working together instead of competing.
But among the secondary effects of a merger are the consequences on production and sales. As there is less competition, the repositioning of brands within the new group may force the abandonment of some models to avoid redundancy or cannibalization.
Added to this are the changed conditions of the global markets. China now plays an important role. Tesla has taken the industry by storm with its electric cars. The supply chain is now more important than ever, and in many cases, software matters more than the performance of a car. In other words, the industry has changed a lot in the last 20 years.
Is The Merger Paying Off?
I think so. The goal of any business in the capitalist world is to earn a profit, and 2022 results confirm that this is happening at Stellantis – selling fewer cars while earning more. However, the reduction in the volume of deliveries makes them more vulnerable to growing competition from Chinese brands. The company is growing very rapidly and its global expansion plans could include the acquisition of vulnerable Western automakers. Time will tell.
The author of the article, Felipe Munoz, is an Automotive Industry Specialist at JATO Dynamics.