Stellantis has too many unsold cars and it’s a huge problem

It’s no secret that Stellantis (STLA) has been in deep trouble lately.

Last week, the multinational automaker and parent company to some of Detroit’s biggest names confirmed it was looking for a new CEO. Although the automaker said such procedures are entirely routine, the move comes amid an unfortunate pattern of events that has resulted from its first-half 2024 earnings report in July 2024.

In a call with investors, CEO Carlos Tavares reported dismal results stemming from a “challenging industrial context” and its own “operational issues,” particularly in one of its most valuable markets.

“We have significant work to do, particularly in North America, to maximize our long-term potential,” Tavares said.

Related: Stellantis looks for new CEO amid fervent pressure from auto industry

However, the automaker pursued drastic measures, such as voluntary buyouts for white-collar workers and layoffs of more than 2,450 assembly line workers after the Ram 1500 Classic was discontinued.

In addition, his press office has been busy deflecting attacks from a coalition of Stellantis USA brand dealers, Shawn Fain, and the United Auto Workers over business decisions affecting their respective groups.

However, a new report shows that a bigger concern is holding back one of the big three.

2025 Dodge Hornet

Stellar

Too many (unsellable) cars, so little time

According to Stellantis’ own data, sales of its American brands such as Jeep, Ram Trucks, Chrysler and Dodge are struggling in the United States. From January to June of this year, Chrysler sales fell 8%, Jeep sales fell 9%, Dodge sales fell 16%, and Ram sales fell a catastrophic 26%.

With sales struggling, it’s easy to point out that an inventory crunch is looming. Dealers are struggling with large lots full of unsold vehicles. In their letter to Carlos Tavares dated September 10, US brand dealers Stallantis blamed Tavares for the “rapid degradation” of their brands. They urged him to spend more to clear excess and old inventory from their lots, calling the current situation “a disaster.”

According to an analysis by car shopping website CarEdge, six of the ten slowest selling cars are owned by Stellantis. Specifically, the Alfa Romeo Giulia tops the list with 617 days of supply, Alfa’s Stelvio crossover SUV is third with 456 days of supply, and the Fiat 500e is fourth with 454 days of supply. supply.

At the bottom, the small Jeep Renegade ranks eighth with a 332-day supply, while its bigger sibling, the Jeep Grand Wagoneer L, ranks ninth with a 327-day supply, while tenth place goes to the Dodge Hornet with a 323-day supply.

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In an announcement made early on September 30, Stellantis added a little more color to the big picture.

The automaker said it had “accelerated its planned normalization of US inventory levels,” which prioritized its goal of having “no more than 330,000 units of dealer inventory by the end of 2024” in instead of 2025.

In addition to reducing production at its plants, another alarming action it explicitly mentioned was “increased incentives for 2024 and older model vehicles,” suggesting the possibility of an oversupply of unsold. older there may be cars sitting on dealer lots.

According to CarEdge, the Jeep Renegade was a slow-selling car, with dealers keeping a 332-day supply. The company’s crossover SUV was discontinued in the US and Canada after the 2023 model year.

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However, the move in North America helped Stellantis lower its adjusted operating income margin guidance from “double digits” to between 5.5 – 7.0% for 2024. Additionally, the automaker expects now at a negative cash flow between 5 and 10 billion euros ($5.58-11.17 billion).

The automaker also blames weakening global demand and heightened competitive dynamics due to increased industry supply and increased competition from China.

In a note published by Bernstein analysts on September 30, they wrote that the company has been slow to address concerns about the size of its US inventories that dealers initially mentioned.

“Stellantis has been criticized for apparently not acting quickly enough, so this starts to address that complaint, but the magnitude of the impact on margins far exceeds our already reduced expectations,” the analysts said.

Stellantis, which trades on the New York Stock Exchange, is down 13.86% today, trading at $13.83 per share at the time of writing.

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