(Bloomberg) — Stellantis NV set a goal to maintain double-digit returns through the end of the decade by cutting costs and deriving extra revenue from new services as the automaker speeds up its electrification push.
Adjusted operating income margin will exceed 12% by the end of the decade, while net revenues are set to double to 300 billion euros ($334 billion), Stellantis said Tuesday. The carmaker last week reported an 11.8% return for 2021 after getting past supply snarls and labor shortages with production of more profitable vehicles.
“We’ll continue to be the most efficient automaker with respect to capital spending,” Chief Executive Officer Carlos Tavares said during a presentation in the Netherlands. Competitors who don’t make the transition will fail, he said.
The plan comes a little over a year after the mega-merger between Fiat Chrysler and PSA Group to form a sprawling manufacturer across 14 brands with nameplates like Jeep, Ram and Fiat to add scale in the EV and autonomous driving shift. Since then, Stellantis has faced head on unprecedented shortages of semiconductors and remaining challenges from the pandemic.
Efforts across engineering, supply chain and purchasing teams are wringing costs from operations to make the company 30% more efficient on capital expenditures and development spending than the rest of the industry, Tavares said. He’s also trying to drive down distribution costs by 40% by digitizing sales and marketing operations.
Extra Revenue
Tavares has mapped out a push to plow 30 billion euros into electric cars and software. He seeks to introduce more than 75 fully-electric models by 2030 with annual sales of 5 million vehicles. While the carmaker is spending big on the rollout, it’s pledging to maintain strong returns, relying on extra revenue from software and services as well as premium vehicles.
Stellantis will lean on partnerships with Foxconn Technology Group, Waymo and BMW AG and has said it plans to generate about 20 billion euros in extra revenue from software-driven features in its vehicles by the end of the decade.
After early successes to deliver on a promise for synergies of 5 billion euros as part of the merger, Tavares said the manufacturer will achieve the goal in 2024, more than one year ahead of schedule.
Stellantis also upped a target for EV sales, planning to switch all deliveries to plug-in hybrids and battery-powered cars in Europe by 2030, up from a previous goal of more than 70%. For the U.S., the manufacturer now targets half of all sales to be electric, compared with more than 40% before.
The Jeep maker teased an image of the first fully-electric Jeep sport utility vehicle, due to be released in the first half of next year. It’s planning to develop an electric off-road SUV and a lifestyle family utility vehicle.
The electric Ram pickup will come in 2024 and be able to compete with models from Ford Motor Co. and Tesla Inc. on range, towing, payload, and charging time, Tavares said. The potential for the Ram brand beyond North America is “enormous,” the CEO said.
China Reboot
Stellantis is working to improve business in China, where both PSA and FCA lost money before the merger, by cutting capacity and relying on what Tavares is calling an “asset-light” strategy.
The carmaker will boost utilization at a single plant — its JV with Guangzhou Automobile Group Co. — and rely on imports of brands including Jeep and Maserati vehicles. Stellantis is waiting for Chinese officials to sign off on a plan to increase the company’s stake in the venture to 75% from 50%, the CEO said.
Stellantis Reboot in China Sparks Conflict With Local Partner
“There is nothing wrong about having a highly profitable” business of importing completely built cars, Tavares said. “We are trying to set up a business model that carries the lessons we have learned the hard way.”
(Updates with CEO comment in third, details on China strategy from 12th paragraph.)
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