Stellantis has ‘misplaced confidence in its own pricing power’ as US struggles continue, says Bernstein

Italian carmaker Stellantis is at risk of alienating huge chunks of its US market as rising prices saw its market share shrink, a dealer for the carmaker in the country has warned.

Stellantis has been aggressively raising prices in the US since its creation in 2021 through a merger between Fiat Chrysler and France’s PSA Groupe. CEO Tavares targeted profits and cost reduction rather than increasing market share.

So far, the gamble has not paid off.

Stellantis spooked investors in September when it became the latest automaker to issue a profit warning. Shares of the automaker are down more than 43% year to date.

The auto giant raised prices for its Jeep, Ram and Chrysler brands in the U.S. on the back of strong profits between 2021 and 2023. Equity research group Bernstein says this made Stellantis “overconfident” and it is now paying the price.

Bernstein spoke with Kenn Volz, owner of Volz Auto Group, which includes two Stellantis dealerships, to understand why customers seemed wary of buying their cars.

Stellantis prices

Volz asked who Stellantis was pricing his models for, name-checking his $100,000 Jeep Grand Wagoneer.

“Not everyone can afford a Wagoneer. How many people can afford a $100,000 SUV outside of bankers and people in Manhattan?” Volz said.

“The teacher in Connecticut probably can’t afford that. So it’s like they’re limiting their addressable market.”

Volz concluded: “They are all beautiful cars. They are just too expensive.”

Stellantis is trying to reduce inventory at its partner dealerships to ensure there will be no more than 330,000 in those locations by the end of 2024.

The automaker considers itself a premium brand; in other words, it’s a manufacturer that has a USP that drivers are willing to pay a premium to get. Bernstein analysts, however, do not believe that drivers are on board with this proposal.

“Stellantis’ misguided belief in its own pricing power means it’s losing customers to strong, lower-priced competitors like the Toyota RAV4 or Honda CRV,” Daniel Roeska and Stephen Reitman speculated following the conversation with Volz.

“Consumers do not place a premium on Stellantis or are unable to pay for a higher monthly payment, and the company has not addressed this issue, which is contributing to the loss of market share.”

Bernstein says Stellantis will have to cut prices to regain market share. Once it does, however, the bank says Stellantis will struggle to bring prices back up.

A representative for Stellantis did not immediately respond to a request for comment.

The Mistakes of Stellantis

The equity research group’s comments may align with the thoughts of Stellantis CEO Carlos Tavares, who blamed his “arrogance” for not identifying three concurrent mistakes at the automaker that led to double-digit sales declines in US.

The story continues

Tavares said Stellantis has been too slow to sell its bloated inventory, has encountered production problems and lacks “sophistication in how to get to market.”

“When I say we were arrogant, I’m talking about myself, no one else. I’m talking about the fact that I should have acted immediately, recognizing that the convergence of these three issues was there and we had to set up a task force to address them,” Tavares said at the Stellantis investor day in June.

Tavares is reportedly planning an overhaul of Stellantis’ management structure to revive the automaker’s fortunes.

Stellantis chairman John Elkann is also looking for a successor for Tavares, 66, whose contract ends in 2026. Bloomberg previously reported.

This story was originally featured on Fortune.com