Investors hoping for a Stellantis (STLA 2.26%) global turnaround were waiting for last Thursday, when CEO Antonio Filosa, after less than a year at the helm, detailed the automaker's plans for the future during a full-day presentation. There are six pillars to the plan, filled with strategies for 14 brands, for a total price tag of $70 billion spanning five years. The plan is complex, but the simplest part of the whole thing might be the most brilliant.
Death of affordability
If you haven't felt the pain yourself, you surely have still heard from someone who has: The U.S. has an automotive affordability crisis. Rising new-car prices are one of the largest issues facing the U.S. automotive industry.
New vehicle average transaction prices (ATPs) have boomed from roughly $35,158 in 2016 to nearly $50,000 by the end of last year, according to data from Cox Automotive. Historically, ATPs have increased an average of 3.2% year over year, but the figure nearly tripled to 9% between 2020 and 2022. Just as important as the overall price tag is the brutal hit consumers are taking with monthly payments. The average new-car payment is a staggering $749 per month, and 20% of new-car buyers are committing to payments topping $1,000, according to CarEdge. It's a bit out of control.
Image source: Stellantis.
That's a problem that needs to be solved, and what a perfect opportunity for Stellantis, which is looking to reverse its lengthy market share decline and regain sales volume. That's what makes the simplest part of Stellantis' turnaround the most brilliant. Stellantis plans to launch nine vehicles priced at less than $40,000 by 2030 in North America. It gets a little better, too, as two of those vehicles are planned to hit under $30,000.
There is immense demand in the U.S. automotive industry for more affordable vehicles of all kinds, not just electric vehicles that are typically more expensive and face a similar dilemma. If you're keeping track, Stellantis' U.S. sales have declined for seven consecutive years, and despite sporadic quarters of growth, it's been a steady slide. There might be no quicker or more effective way for Stellantis to reverse that sales slide than unleashing a long list of vehicles well below average new-car prices.
NYSE: STLA
Key Data Points
What it all means for Stellantis investors
Stellantis' overall plan aims to improve margins, revenue, and volume, while boosting its U.S. production capacity utilization to 80% by the end of the decade. The plan will tell you it all revolves around six key pillars that include sharper management of its brand portfolio, targeted investment in global platforms, and new partnerships that embolden Stellantis' strengths, among other things, but the simplest part of the entire strategy shouldn't be overlooked: Affordability could be key to turning around Stellantis.
