What is Stellantis?

The world's 4th largest automobile manufacturer, Stellantis, is a name many may not recognise, however, it's brands are extremely well known. In January 2021, Italy's Fiat Chrysler Automobiles merged with France's PSA Group to form Stellantis, which includes Jeep, Ram, Dodge, Chrysler, Fiat, Abarth, Alfa Romeo, Lancia, Maserati, Vauxhall, Peugeot, Citroen, Opel, & DS phew! To understand the monstrosity of Stellantis, we need to take a look at the numbers: $177.6 billion in revenues, $65 billion market cap, & it's listed on the Milan, Paris, Amsterdam, New York Stock Exchanges.

Analysts call this merger a 'merger of equals'. The merger will benefit PSA & FCA in a number of ways. Firstly, joint production costs will be down by $4 billion, and this money can be invested in scaling tech and hardware. All the brands will operate independently at the front end with massive synergies at the back-end in order to optimise competencies. Most of Stellantis' brands are under-appreciated and don't sell in the same volumes as its other European rival- Volkswagen Group. Stellantis' CEO, Carlos Tavares announced that none of FCA & PSA's factories will be shut, & all jobs will be retained.

Winners & Losers:

Peugeot is Stellantis' best-performing brand along with Jeep. For a time, Peugeot was favoured as cheap to buy cars for first time drivers. However, after Volkswagen's revival of Skoda & SEAT as premium European cars, PSA decided to reposition Peugeot, which is now a slightly upmarket brand. There is a visible trend in the automobile industry today: SUVs. Peugeot was ahead of the curve and its 2008, 3008 & 5008 SUVs are extremely popular. Peugeot now wants to enter the US market (after leaving in 1991), and its SUV lineup gives it an advantage.

The only brand that truly benefited from the growing SUV mania is Jeep (it has an all-SUV lineup). Jeep, known for its exceptional off-road skills is the jewel in Stellantis' crown. It is responsible for 1/4 of Stellantis' revenue. The Wrangler, is the brand's top-seller & the Grand-Cherokee saw a 10% increase in sales in 2020. Jeep is now reviving the Grand Wagoneer. India & Latin America are two strong markets for Jeep as roads are bad, and people love SUVs. The Compass in India, and the Renegade in Brazil have done extremely well. Europe is an area of concern for Jeep, as the Compass couldn't compete with the premium Tiguan or Karoq.

Jeep Wrangler

Peugeot's sister firm Citroen is another recent success story. Citroen, under Linda Jackson's leadership, repositioned itself as a younger brand with clearly defined products. The C3, C4, C5 models have won awards internationally for their design & driving capabilities. Citroen entered India in May 2021, and plans to gain a 2% market share. Citroen will only launch SUVs, & hatchbacks, two categories that account for 80% of car sales in India. Citroen also has a JV with Dongfeng Motors in China.

PSA acquired Opel & Vauxhall from GM in 2017 for $3.2 billion. The two firms made a profit of $1 billion in 2019, the first positive income since 1999. Both the brands have benefited enormously from sharing platforms, tech, & engines. Opel now plans to enter Russia & Japan, with its Crossland, Mokka, Grandland SUVs and its Astra hatchback.

Ram is an American success story. It was spun-off from Dodge in 2010, and only makes pickup trucks & light commercial vehicles. The Stellantis formation will benefit Ram because of Fiat's ownership of Iveco. Ram has a 26% market share in the pickup trucks category in the US, and outsells the Chevy Silverado, the poster-child of American pickup muscle.

Despite Stellantis' many revenue-drivers & winners, it also has a few headaches. Fiat is one of the world's most storied car brands, however, it has been struggling for the past decade. Its market share dropped to a historic low in Europe in 2020. Its lineup just consists of 3 models: Fiat 500 (and its iterations), Tipo, & 124 Spider. Fiat's new electric 500 is lapping up orders across Europe, however, the brand is hugely reliant on the city car for its income- a type of car that's tough to make money on, especially with expensive battery technology.

Electric Fiat 500

Alfa Romeo is another headache for Stellantis. The company spent billions of dollars in R&D for its new Giulia & Stelvio models, however, the cars weren't received well. It hasn't been able to take the fight to the Germans hard enough. Alfa Romeo just sells 25,000 cars a year with a 0.5% market share in Europe. It also has a long-term bad reputation for unreliability.

Maserati is the brand with the smallest volumes in the group. It sells 18,000 cars annually, and most of it comes from the Levante, Maserati's crossover SUV. It has the potential to grow, and Stellantis should push it further upmarket by scrapping the Ghibli (the 5-Series competitor), and positioning the brand alongside Porsche & Aston Martin. Lancia only has one model, the Ypsilon, which is Italy's second best selling car. Stellantis can create synergies between Lancia & Vauxhall (both are inexpensive brands).

Lastly, we come to Stellantis' most underperforming brand, a brand that has the potential to scale: Chrysler. Chrysler, historically a titan of American automotive manufacturing, is struggling. It just has 3 old models in its lineup, and has lost out to competition (Ford & GM). Dodge is suffering from an identity crisis of its own, and has decided to shift its focus to performance cars: Challenger, Charger, & Durango. These cars will be placed under the SRT category.

The Road Ahead:

The automotive industry has reached an inflection-point. Startups such as Tesla & Rivian have become serious competition. Autonomous, EV technology are rapidly scaling. Brands such as Dodge, Jeep, & Ram are infamous for their CO2 emissions. Ram launched the 1500 pickup truck with a mild hybrid system in 2020 and Chrysler launched the plug-in hybrid Pacifica minivan. Stellantis now plans to roll out 10 EV models in 2021. Stellantis is also developing an autonomous-technology platform of its own to compete with Google's Waymo & GM's Cruise.

Cross-border mergers generally fail due to diversity clashes, which was visible in the Daimler-Chrysler, Ford-Volvo mergers. Stellantis includes brands from Germany, USA, France, Italy, & UK. Creating an environment of inclusion and leveraging its diversity will be paramount to them. Only time will tell, if Stellantis will go down in history as a successful mega-merger or as a failed one.

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