There are many reasons I might not envy the average Chrysler/Dodge/Jeep/Ram dealership right now. With the highest inventories and the weakest products, there isn’t a lot of room to improve. It’s even worse for the customers who “took a bath on their last vehicle” and are now entirely stuck.
The shortage-fueled sugar high that Chrysler/Jeep/Dodge/Ram parent company Stellantis was on during the pandemic has fully resulted in an inevitable crash landing. I often tell the story of the industry each Morning Dump from, well, the perspective of the industry. In this case, I think the customer view is a little more interesting.
Still, I’ll let Carlos Tavares explain why he thinks sales are faltering in North America and it’s kind of amazing how wrong he is. At least, how wrong I think he is. His fellow CEOs might also disagree with him about how Europe should proceed with its decarbonization efforts.
EVs are still on the rise globally and it’s due mostly to one country.
Stellantis Customers Are Getting Hit With A Boomerang
I’m not sure that any carmaker fared better because of the pandemic than Stellantis. When it looked like the world was shutting down carmakers quickly canceled their orders for semiconductors. This was, seemingly, the wrong choice as automakers discovered there were few backups. To make matters worse, the chipmakers prioritized getting up the kind of personal electronics that were suddenly in high demand (everyone was at home) and more profitable.
This caused automakers to lose a lot of production, but not necessarily a lot of money. I cover this in great detail in my Trimflation article, and you can read that if you want a fuller picture. TL/DR: Car companies lowered incentives to zero, prioritized the building of the priciest models over lower trims, and took advantage of near-zero interest rates to sell cars at extravagant prices.
Stellantis made gigantic profits during this period as it was an automaker with a lot of old product lines, easy-to-produce products, and was investing less in electrification than some of its peers. While a vehicle like the Durango or Compass might have been old even four years ago, they were still relatively cheaper than some alternatives and, being old, gave Stellantis huge margins.
This is obviously biting the company in the bustle back now, with its dealers calling Stellantis a “disaster.” I’ve been focused on the old product and lack of competitive incentives in my critiques of Stellantis. What I missed was the obvious problem of old customers coming back to dealers in the United States and finding themselves in a tough position.
The Detroit Free Press has an enlightening interview with Scott Kunes, the COO of a Midwestern dealership group, that just closed two Stellantis stores. While he talks about all the big issues, it’s the negative equity issue that struck me as a big deal this morning:
Kunes said the inventory situation has improved slightly, but he noted that because it hasn’t improved enough and dealers are being squeezed by high rates they have to pay for the vehicles on their lots.
And Stellantis customers who might be thinking about a new Stellantis vehicle are also facing challenges, he said, because they are in “negative equity positions that we can’t overcome on newer vehicles,” making it hard for them to stick with the automaker’s offerings knowing they “took a bath on their last vehicle.”
Imagine you paid over-sticker with only a small down payment for something like a Dodge Durango in 2021 but kept your monthly payments relatively moderate because you got an extremely low interest rate for 72 months. That Durango is now worth a lot less given that there’s all this low-priced new inventory out there that’s being heavily discounted.
Now you’ve decided that your car payment is too high and you want to lower it or, at maybe, you want to get a new car for roughly the same monthly payment. What you owe on your old car is more than the current value (you’re “upside down” or in “negative equity”) and the best interest rate you can get is suddenly much higher. You’re not going to be happy with your Dodge dealer who is telling you to get a new Durango you’ll have to raise your monthly payment significantly.
This is bad for Dodge dealers, who just lost a customer. It’s bad for Dodge customers, who can’t easily replace their cars. This isn’t entirely unique to Stellantis brands–most people who financed a large percentage of a car purchase between roughly late 2020 and early 2023 are at risk–but Stellantis dealers are sort of uniquely hosed by having sold some of the most average cars for some of the most above average prices and lack good, affordable alternatives to sell people.
It’s like a boomerang was fired off at the start of the pandemic and now it’s coming back to hit everyone involved with Stellantis.
Stellantis CEO Carlos Tavares Blames Marketing, Is Probably Not Correct
Feel free to re-read the above story and tell me if you really think the problem is marketing.
I’m going to go back to the Freep as it has a nice companion piece to the article I linked above. It’s from a conversation that Stellantis CEO Carlos Tavares, pictured above talking to reporter David Shepardson, had with the media at the Paris Auto Show this week.
“In the U.S., we were stumbling on the poor Q2 2024 marketing plan that created an inventory issue with the dealers, and now we are fixing that, and we are fixing it at the right pace. As we have already reduced inventory by 52,000 vehicles over the last three months and we want to be below 330,000 vehicles in dealer inventories by Christmas,” he said, noting that the automaker is on a “good track” toward a fresh start next year.
Tavares, who noted that the company’s regions have “a lot of autonomy,” said “the marketing plan that failed in Q2 was proposed and decided by the region.”
To be fair, he said, he’d seen that it was risky and that he could have stopped it but did not.
I’m sorry. Marketing? That’s your problem? I don’t buy it. Stellantis has been slow to release its grip on incentives in order to help dealers sell cars because it wants to maintain a margin that’s essentially impossible to maintain in this market. The company is starting to turn this around, but I’m not sure there’s a marketing plan in the universe that will get people excited about a Dodge Hornet.
Someone get this guy a Crystal Pepsi.
Interestingly, Tavares did come out in favor of keeping the EU’s difficult CO2 regulations, stating:
“The other day my youngest daughter was driving her car in a forest in Portugal, and the forest caught fire, and she had to drive through the forest on fire. The door panel on the right-hand side melted,” he said, describing the need for Stellantis to be on the “right side of history” and contribute to “fixing the global warming issue.”
“So how do you feel if one of your daughters is in this position, and you say, ‘I’m going to ask to postpone the CO2 regulations?’ There is a moment where you need to face reality,” he said.
Stellantis is one of those companies that might benefit from keeping BEV requirements in place as it launches its cheap, European-built Leapmotor electric cars.
BMW CEO: Let’s Talk About EV Requirements, Please
BMW’s Oliver Zipse was also at the Paris Motor Show and he’s arguing that the EU CO2 goals, which require electrification, are going in the wrong direction.
Oliver Zipse, who has long pushed for regulators to permit various technologies – including alternative fuels like e-fuels or biofuels and hydrogen fuel cell cars – said the mood in Europe was “trending towards one of pessimism” and the region needed a new regulatory framework to remain competitive.
“A correction of the 100% BEV target for 2035 as part of a comprehensive CO2-reduction package would also afford European OEMs less reliance on China for batteries,” Zipse said at the Paris Motor Show, adding: “To maintain the successful course, a strictly technology-agnostic path within the policy framework is essential.”
Sales For Electrified Vehicles Are Up 30.5% Worldwide
Electrification is coming, albeit slowly in most places. Obviously, the one place it’s accelerating is China.
Again, from Reuters:
EVs – whether fully electric (BEV) or plug-in hybrids (PHEVs) – sold worldwide reached 1.69 million in September, Rho Motion data showed.
Sales in China jumped 47.9% in September and reached 1.12 million vehicles, while in the United States and Canada they were up 4.3% to 0.15 million.
In Europe, EV sales rose 4.2% to 0.3 million units, thanks to a 24% jump in the United Kingdom and gains in Italy, Germany and Denmark, Lester said.
Chinese EV sales in the EU and Britain are on the rise.
What I’m Listening To This Morning
I heard an interview with Stephen Malkmus where he said he wanted to call his first solo album “Swedish Reggae” but the shot of him from the cover made it look too much like it might be an actual Swedish reggae album so they killed the idea. Probably smart. “The Hook” is my favorite song from that self-titled album, but it’s “Jennie and the Ess-Dog” that’s fueling my morning.
The Big Question
Marketing? Really? Please try to come up for a slogan or marketing plan to sell any current Stellantis product.
Stellantis! Buy Our Cars or We Punch Your Mom
(I don’t think that will work either. I’m sorry, Mom, I do not want a Hornet.)
Incentives are a form of promotions and promotions are the marketing department’s thing. So yes their problem is marketing. So yes Tavares has it right. Every car or truck will sell if the price is right.
1st Gear (or whatever): Until You Have Paid Your Current Loan, YOU CANNOT BUY A NEW CAR TO REPLACE IT.
I am trying to teach my four-year-old financial lessons of this sort; pathetic that such an enormous number of Americans don’t get something so basic.
[this excludes people who crashed their car or whose CVT took a dump or who suddenly had sextuplets or whatever other theoretical justification for buying a new car I will have to hear about]
From a purely performance standpoint, Stellantis products are typically extremely unpopular with those “in the know”. Out of the 50 or so people that worked at the speed shop I worked at, only one employee drove a Mopar and it was an older Ram. Every other major make was represented with multiple Ford, Nissan, Mazda, BMW, Audi, Honda, Subaru, and Chevy products represented but none of the employees wanted to touch Dodge anything. Ironically, the majority of our business was modifying Dodges and Subarus, although a large portion of both was because of failures. Cam failures for Dodge and multiple types of engine failures for Subarus.
“Stellantis”
Who it the heck has ever heard of them? Ask your neighbor, ask your friend. No one has, that’s the answer.
My marketing solution for Stellantis….
Yes! And for those who say the name has to incorporate the other national brands, no it doesn’t. It can be Fiat in Italy, Mopar in the US, and PSA in the UK. I am sure they’re all registered in Luxemburg in any case, and I don’t care what shell companies the accountants will have to create.
As a Ram owner, I completely concur with the “all your current customers are underwater”.
I have a 2018 Ram 2500 diesel. Sticker was $62k and I drove it away at $53k. I guess being a diesel it as a hard sell because it was on their lot for months.
Around 2023, I more or less saw the same make/model/trim on a lot. Looking it up, the sticker was $82k! And when I talked to them, that was non-negotiable PLUS a $5k “market adjustment” at $87k. I have a Big Horn, not a Laramie or some high end trim. Talking one level above work truck.
So practically the same exact truck and the drive away price is over FIFTY percent higher than 4-5 years ago? I laughed out loud and sure enough it sold in a few days. If they didn’t put down a significant chunk of change, they are easily paying $1100+/month and way underwater given the surplus on the lots and post COVID rot.
But on the flip side, my 2018 is easily worth $30k+ due to these folks feeding the beast by purchasing way above reasonable numbers. If I wait out Stellatnis a little bit, I might find the sweet spot of my current Ram maxed out in value vs their desperation to move vehicles.
Unrelated, your username and profile picture are fantastic
There are still new 2023 Challengers out there. It’s essentially a two year old car with about $3000 on the hood. Then they have the nerve to brag about it.
“ Get this guy a Crystal Pepsi” is a Ted Lasso worthy line. Well done Mr Hardigree.
Also, the more you read “China” on one side and “Germany, France, Sweden etc “ with regards to market share- both importing and exporting- it should be clear that the issue is unity and size. China is huge AND monobloc, while Europe’s smallness is made worse by disunity.
And Stellantis looks like the perfect trojan horse with their Leapmotor weapon. Eeek.
“describing the need for Stellantis to be on the “right side of history” and contribute to “fixing the global warming issue.”
He said, as he boarded his private jet a few moments later.
As they do, as they do.
We’re customers meant to be sold a product, we are never more than that. That being said, I don’t know how a Wrangler isn’t one of the cheapest cars you can possibly buy right now with old engines, old body’s- the tooling was paid off decades ago these should be the cheap and cheerful vehicles that get people buying your product in the first place. Instead, they kept taking money and somehow still managed to make it continuously unreliable generation after generation.
You can have a shitty product and you can have an expensive product, but never both in the same product.
What the market will bear, my friend.
They built a new factory in Toledo for the JL (technically a new line at the greatly expanded existing factory), so it’s not an “old body” per se. It looks almost exactly like the JK, but that’s intentional — Jeepers want Jeeps to look like Jeeps. Anyway, they poured a lot of money into it, but I’m glad they poured it in the United States. (To his credit, Sergio did that a lot.)
Perhaps the attempt to move the Jeep brand upmarket is the kind of “marketing failure” that Tavares is referring to, but I doubt it. Jeep was and is by far the most recognizable American brand in the FCA/Stellantis portfolio, and they wanted it to be an aspirational brand. Apparently they thought “aspirational” was the same thing as “more expensive”.
It could be worse for Stellantis customers. If they could trade in their underwater cars for new Stellantis cars, they’d be triple screwed.
Underrated take.
I won’t try and top some of the slogans I’ve already read. But I do have a question about auto company marketing plans;
I have some experience working with marketing teams in (mostly) the CPG space. Admittedly a very different space from automotive. But I find marketers are generally all working from an identical playbook, using the same tactics. And in all of the marketing plans and budgets I’ve seen, discounts, coupons, incentives… any sort of temporary price reduction is always a part of the marketing plan.
So, could Tavares’ comments been referencing the plan for incentives, at least in part? If so, I think he might be onto something. Was the US Stellantis team making the decision to try and keep margins high? I guess it’s possible…
“If you can find a better car, buy it.” Ghost of Lido.
I think “meh” about pretty much all new Stellantis offerings these days.
Drop the “these days”, and ditto
Mine has been this century.
History may or may not remember Pictured Above as Stellantis’s most effective leader, but at least he makes noises indicating he has a conscience.
For tens of millions of dollars a year, I too can play-act to having whatever emotion you desire.
He sure is empathetic when moneys on the line!
It’s marketing.
Tavares’ story about his daughter in Portugal will push a lot of different buttons on different people. Surprisingly self-aware for a CEO.
Tavares’ daughter in Portugal, seen below.
This would be an image if I could post an image.
Um, that’s not her.
That may be a reference to the “Tavares” picture above.
Needs more flames in the background, though.
I’d say its not just those who bought CDJR vehicles at sticker or above who have issues. I leased my 4XE with nearly $20k in discounts (including the EV credit) and if I were to get rid of it right now the trade in value is so poor that the negative equity is more or less the equivalent of the remaining 18 months of lease payments. It would be preferable at this point for it catch on fire from the latest recall.
Salty take: Screw the dealerships and their ADM. They laughed all the way to the bank until it came back to bite them in the ass.
More salt on the wound:
People who roll over debt from one car into payments on a new car, and then hope to do the same again, do not deserve our pity – nor do the businesses that prey on these ignorant folks. This group of people probably could not qualify for a prime new car payment anyway even if their local ‘friendly’ Dodge dealer did have something more affordable and interest rates (for well-qualified buyers) were zero.
Yeah, anyone in this situation merely needs to hold onto the vehicle. Why are they even trying to get into something else when even a Stellantis product should be fine to run for a few more years? Pay it off and drive it into the ground. Save money that isn’t going to payments for a car from a company that doesn’t suck when the Stellantis garbage starts dying. Some people who have shit credit are in that bind because they continually make bad decisions and I have no sympathy for them and the people stuck in this situation here are the bad decision types. It’s not like the information about reliability and depreciation of this junk isn’t out there. And screw the dealers, too. They were more than happy to stiff people when they had the chance. This is like listening to the cries of a failed scammer. While I’m at it, screw Stellantis for maliciously poor management raking in very obviously temporary profits and lining their pockets rather than reinvesting them in product. It should be criminal. With great rewards come great responsibility, but since the parasites in charge ignore that responsibility, they should face great consequences.
Normally if evil people take advantage of the shortsighted and dumb, I kind of shrug my shoulders. Sadly, our complex and intertwined economy means that I will somehow end up paying for much of this stupidity and cupidity.
See my comment above.
Echos of the financial meltdown of the 2006 time-frame. Then houses and banks, now cars and banks. People will continue to make poor choices until they die off.
^ this is the correct answer!
╭∩╮( ͡° ͜ʖ ͡°)╭∩╮ dealers!!
Stellantis: Hey! It beats driving a Mitsubishi.
I dont know, I think their reliability may be better at this point.
Only if you count Fiat, Alfa Romeo, the Hornet,…
So maybe?
Maserati?
Mitsubishi owner here: No!
(To be fair, I have an older Lancer. Remember the Lancer? They should bring that back, complete with the Evo trim. Not as a stupid crossover, either.)
uhm, about China and their EV market:
“China holds the title of being the largest market for electric cars worldwide, responsible for 60 percent of global electric car sales in 2022. In the same year, China witnessed a substantial surge in the sales of clean cars, reaching almost 5.67 million units, indicating a remarkable 90 percent growth compared to the previous year.
“China has extended its tax exemption policy for new energy vehicles (NEVs) until 2027, showcasing its commitment to promoting the electric vehicle (EV) industry. This move is expected to boost domestic sales and maintain China’s position as a global leader in EVs. The extension provides stability and support for consumers and manufacturers, besides encouraging foreign investment prospects in electric mobility.
“Under the extended policy, NEV vehicles purchased in China between January 1, 2024, and December 31, 2025, will be granted an exemption from the purchase tax amounting to as much as RMB30,00 (US$4,170) per vehicle.
“The Chinese government has been actively providing substantial incentives to buyers and offering subsidies to car manufacturers for over a decade, aiming to bolster the clean car sector. These efforts have attracted a significant number of companies to the Chinese auto market. At one stage, consumers could receive incentives of up to RMB60,000 (US$8,317) when purchasing an EV – until January 2023.
—
So, the EV market is heavily subsidised but people bought a lot thinking that the subsidy would be eliminated… however SURPRISE! you have one more year so so better buy THIS YEAR cause after that the subsidies really are going away – not like last time.
https://www.china-briefing.com/news/china-extends-nev-tax-reduction-and-exemption-policy-to-2027/
I’ve got one, test drive any Stellantis vehicle, and if you show proof of purchase of a direct competitor’s vehicle within 30 days, receive $100 cash
“Hey, I test drove a new Ram 2500 dually pickup a couple months back, but you wouldn’t finance me so I bought an old GMC Canyon I found on Facebook instead – Where’s my $100?”
“Um, Sir – that does not qualify.”
.
“See what I got strapped to my back? I know my 2nd Amendment Rights.”
“Here’s your money”
Dealers need to give their sales managers leeway to deal with difficult customers
Look, you bought a truck, how about a $10 Sbarro gift card with $4.97 remaining?
Only the 3500 comes in a dually 😉
Oh Chrysler. Has there ever been an auto company as boom & bust as them? It’s sort of interesting, I’ve owned a car from all of the BIG 4 (yes AMC counts) except for a Mopar product. I really do hope they’ll pull their heads out of their asses and put out some cars that are actually worth a shit.
It’s worth noting, they’ve done a lot of things I really like, and a LOT of things I really hate.
Well, Chrysler hasn’t really existed as a company since 1998, for the past 26 years, it’s been overlords making decisions for them. Or refusing to make decisions
“Or refusing to make decisions
There is no “Chrysler” left to speak of as brand ethos and some continuity in key people, ideas etc. it’s just a bunch of employees running around following conflicting orders.