Stellantis Plans Aggressive Cost-Cutting Amid Rising Competition

Stellantis CEO Carlos Tavares declared on Thursday that the company would focus on strong cost-cutting efforts.
Stellantis CEO Carlos Tavares declared on Thursday that the company would focus on strong cost-cutting efforts.

Stellantis CEO Carlos Tavares announced on Thursday that the company will focus on aggressive cost-cutting measures instead of relying on protective tariffs against Chinese-made imports.

Speaking at Stellantis’ investor day, Tavares emphasized that the company seeks to maintain its market leadership and profitability despite increasing competition from Chinese automakers like BYD and Chery.

Despite market challenges, Tavares assured investors that Stellantis remains committed to achieving double-digit profit margins on its adjusted operating income (AOI). This statement reaffirms the company’s long-term financial goals.

Impact of EU Tariffs on Chinese EVs:

The investor day followed the European Union’s decision to impose additional duties of up to 38.1% on imported Chinese electric vehicles starting in July. This move, mirrored by similar actions from Washington, has drawn criticism from Beijing, which labeled the EU tariffs as protectionist. Despite these tensions, Stellantis’ stock dropped 2.8% amidst broader market uncertainties.

Stellantis plans to continue its “asset-light” strategy in China, focusing on exporting rather than manufacturing. Tavares criticized the EU tariffs, emphasizing that Stellantis will remain proactive and competitive without relying on defensive measures. He highlighted that their strategy is robust compared to many competitors.

Synergies and Cost Focus:

The 2021 merger between Fiat-Chrysler and PSA has yielded significant cost synergies, amounting to €8.4 billion ($9 billion) annually—more than double the initial target. Tavares indicated that at least two U.S. plants require significant turnaround efforts, although specific details were not disclosed.

Industry Analysis and Future Goals:

Paul Waatti, director of industry analysis at AutoPacific, noted Stellantis’ focus on aggressive goals and the company’s adaptability to the rapidly changing market landscape. This adaptability is crucial as the company strives to meet its announced initiatives.

Stellantis has acquired a 21% stake in Chinese automaker Leapmotor and formed a joint venture to sell and manufacture Leapmotor vehicles outside China. Stellantis holds a 51% stake in this JV, demonstrating a strong appetite for international growth.

Financial Forecast and Shareholder Returns:

The automaker confirmed its forecast for 2024 and plans to target the upper range of its 25% to 30% dividend payout policy in 2025. This commitment includes rewarding shareholders with at least €7.7 billion through dividends and buybacks this year.

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Tony Boyce is a seasoned journalist and editor at Sharks Magazine, where his expertise in business and startups journalism shines through his compelling storytelling and in-depth analysis. With 12 years of experience navigating the intricate world of entrepreneurship and business news, Tony has become a trusted voice for readers seeking insights into the latest trends, strategies, and success stories.

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