Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stellantis NV (STLA, Financial) is launching a significant product blitz with 20 new models, indicating a strong future product lineup.
- The company has maintained a double-digit AOI margin, demonstrating resilience despite challenging conditions.
- Stellantis NV (STLA) has returned EUR6.7 billion to shareholders and plans to meet its commitment of EUR7.7 billion, showing strong capital return policies.
- The company is making significant strides in electrification, with new electric models like the Maserati Grecale and Ram 1500 REV.
- Stellantis NV (STLA) has achieved leadership in LCV sales in multiple regions, including Europe, South America, and the Middle East and Africa, indicating strong market positions.
Negative Points
- H1 2024 results were disappointing, with several headwinds impacting performance.
- The company faced high R&D, CapEx, and M&A expenses, which are now being addressed.
- Operational flaws within Stellantis NV (STLA) contributed to the disappointing results.
- Marketing tactics in the US market did not deliver the expected results, impacting overall performance.
- Industrial free cash flow was near zero, reflecting challenges in managing working capital and investments.
Q & A Highlights
Q: The question I had was with respect to the North American markets. When I look at the market, I can observe that there have been two segments showing strong growth this year, which have been the compact and small SUV segments, where it looks like you're somewhat underrepresented with the Renegade Compass and Cherokee. Could you maybe talk -- you mentioned in your opening remarks plans to bring a mid-sized Jeep to the market. Do you have something to address the smaller market segment? And would there be any opportunity to bring the cheaper Avenger to the US, or is that difficult to get homologated or simply not feasible? Thank you.
A: Well, thank you, George. Those are two excellent questions. Well, first of all, what you say is absolutely correct. One of the things we are missing right now in the US is the brand-new Cherokee, the compact SUV. We will bring it in 2025, the Cherokee that will complement the Grand Cherokee. It's in the making. It's on the right track. So that, what we would call right now the white space, is going to be filled in '25. And this is absolutely appropriate to highlight that miss. It's underway, and it's going to be done in a very proper and exciting way as they have seen the designs of this product. Secondly, no regrets on the Renegade. The Renegade was not making money. So no regrets on the Renegade. We are going to bring a product that you would call the Renegade successor. So far, we have not yet decided what then it would be, but that will come in '26. And it will come with the customer structure and the cost structure that will make the model profitable. This is going to be the model that will be sold at $25,000 as an EV. It's in the making. It is benefiting from everything we have learned on the smart car platform families. And this product is going to be bringing their profitability and the price point of $25,000 and the zero-emission mobility. That's for '26. So the two points you addressed are absolutely those that we are working right now on. We agree with your point. Avenger has proven to be less attractive for the US market. So we have decided to bring Avenger to Latin America. Latin America is going to be the place where we are going to introduce the Avenger very soon. It has already been decided a few months ago, and it will come, I believe, let's say, within 18 months as a Latin American sourcing of compact Jeep that will complement the Jeep Renegade that we already have in Latin America. So those are the things we are doing right now to address your very fair remarks. Thank you, George.
Q: Hi. Good afternoon, everyone. Thank you for taking my question as well. Carlos, unfortunately, I'm going to touch on one of your favorite topics again, pricing. But can't help but notice the significant deterioration in pricing in Europe, North America, and South America in Q2. How much of this can we attribute to working through old model year inventories? And is this now the base that we should expect for the rest of the year? Price is going to deteriorate further from this point, or could there be a bit of a moderation in the coming quarters? Thank you.
A: Well, thank you, Michael. You are right, it is one of our preferred topics because it's a way to monetize the value that we create. And there is no sense in destroying the value that we create through pricing that do not represent what the customer should recognize. In terms of pricing power, what we believe is that pricing power is not an absolute concept. It is about when you are in a price band with your competition, making sure that through the appeal of the products and through the quality of the products, you can be positioning yourself in the high end of the related price band. So it's a relative concept where in the price band where you are competing, you look at your competitors in that segment and for the price band that that segment represents. You want to monetize the value that you have created and the appeal that you have created with your teams. So indeed, what we try to do, and we don't always succeed, is for a given segment and the related price band to be at the high end of that price band. Now what we do not say is that this is frozen. That the price band of a given segment may move up and down depending on the competition. You can expect that some Chinese competitors will try to bring the price band down. And if the price band is down for that given segment, we have to adapt because if we don't adapt, then you will tell me that we are too pricy. So what we can do is for a given price band for a given segment, we can monetize at the high end of that price band by bringing more appealing products that hopefully we can sell with smarter tactics. This is what we are trying to do, and we don't always succeed. But that's what we are trying to do. Now if the price band moves because of the offering, because of the competitive set that is coming to the market, obviously, we have to recognize that the market is the market. And then if that happens and if that price band goes down because of the competitive offerings, then we just need to recognize that and work harder in the cost reduction to create the margins that you can then give back to the market while you protect your base margins. So if you want to protect your base margins and the price band is going down, you have to accelerate your cost reduction and give that cost reduction back to the market to protect your competitiveness. So how are the price bands going to move in the future for the segments in which we are competing? Obviously, it's very hard to answer that question. We can expect that the European market will contribute -- will be under significant pressure because of the Chinese offensive. But it is also true that for the specific European markets, the import tariffs are going to slow down that pressure or reduce that pressure because from 31% to 38% custom duties, that has an impact on the price positioning because it absorbs the 30% cost-competitive edge of the Chinese ex-work vehicles. That means that possibly that pressure will be slightly less strong than what we could expect without tariffs. That is going to help the profitability. And of course, we will try to maximize our margins within the price band of the competitive set in which each vehicle is competing. So the import tariffs in Europe may create some kind of ease. Hopefully, they will. We'll see. But anyway, in the rest of the world, we will be competing harsh head on with the Chinese, which we are currently doing. In the US, the situation is different. And you can see that for the time being, the results of our competitors are not demonstrating that price pressure is going to vanish. So we will just try to be smarter in our marketing tactics. And we will adjust in a non-dogmatic way, wherever we have to adjust, but still keeping in mind that for a given segment, for the competitive set of that segment, there is a price band. And in
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
