Stellantis – Will it become the next Volkswagen Group or is it destined to be the next British Leyland ?

As someone who worked with Vauxhall during what was probably one of their most successful periods it was disheartening to learn that Luton would no longer be a centre for vehicle production.

?Whilst the last car production from the main car plan finished in 2002 with the Vectra, Frontera SUVs were made for a further 2 years. These were built at the IBC plant alongside Vauxhall vans with badge engineered stable mates for alliance OEMs including some from what is now the Stellantis Group. It had been intended to build the BEV versions of these commercial vehicles at Luton but this investment was canned and the plant’s closure announced.

Very sad news.

?It did prompt me to consider if Stellantis is on that slippery slope and its fate will be to end up as a latter day global British Leyland or could it emerge and become a latter day Volkswagen Group with a stable of distinct and high performing brands.

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?If I look back some 25 years to 2009, the brands now making up Stellantis - Abarth, Alfa Romeo, Chrysler, Citro?n, Dodge, DS, Fiat, Jeep, Lancia, Maserati, Opel, Peugeot, Ram Trucks, and Vauxhall sold some 7.6 million vehicles across the globe. In 2023 that number for the same brands stood at 6.4 million. Volkswagen in the same period with its portfolio of brands went from 6.3 million in 2009 to 9.24 million.

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Its fair to say that within the Stellantis portfolio some of the brands have been struggling for a number of years but its fair to point out that Skoda and SEAT within Volkswagen were not exactly European crown jewels but these two brands have both increased sales in this period and found some 600,000 additional customers.

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If we take a UK parochial view its noticeable that whilst a huge amount of change occurred in the last 25 years, UK cars sales volume was roughly the same with 1.953 m and 1.995 million respectively. Of the top sellers in the top twenty there are only 3 marques appearing in 2024 that were not in the chart in 2009. Tesla, (whose first car a Lotus derived roadster had been launched a year earlier, Dacia (whose global sales have doubled in this period) and MG a famous brand but 100% Chinese owned and whose real legacy can be traced back to 1955 with the Shanghai Internal Combustion Engine Components Company – SAIC.

For those wondering the three that dropped out of the UK top twenty are Mazda, Honda and FIAT. The Table is shown below

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As can be seen a massive move away from the fleet sales dominated brands towards more personal brands offering perceived prestige, value or electrification. Against a back drop of a more diverse market with increased choice, VW increased its market share with Skoda and Audi improving significantly. Ex Leyland stable mates Land Rover and Mini also fairing well.

So is Stellantis travelling more as a VW or a BL organisation. Let’s a have a brief history lesson.

British Leyland at its peak its brands accounted for 40% of the UK car market. The company was ultimately the conclusion of a consolidation effort of vehicle production in the UK and became by default the UK national champion and competed with other European national champions.

As can be seen from this very historic data set its productivity and investment were well below what its contemporary competitors were achieving. Its reasonable to say that at the time no observer would claim that the other entities were without problems including industrial relations issues and not anywhere near best in class. Did someone mention Toyota ?

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We have of course come a very long way since 1972. By ?2024 Toyota is reporting that it is achieving productivity of ?24 cars per head whilst VW has risen to 17. Revenue per employee is typically over ￡600k.

The British Leyland Group went from a peak ?40% market share which verged on UK local market dominance to a fragmented and disbursed entity . The final surviving incarnation of the company as the MG Rover Group went into administration in 2005. Today some of its brands survive and indeed thrive in other OEM portfolios as has been seen by Land Rover and Mini sales in 2023.

British Leyland’s demise has many causes. Amongst the many reasons and causes are chronic under investment and poor investment, duplication of competing marques, inadequate investment, duplication of and chronic inefficient production facilities, poor product planning, high-cost base, the reliance on protected markets and a thoroughly unproductive supply chain.

Volkswagen has shown that you can offer the market a differentiated product through a brand portfolio that actually grows its share of the sales whilst winning economies of scale that allow investment to be spread over superior volume.

1972 was a watershed moment for Volkswagen as this year the Beetle became the world's best-selling car. Indeed, on February 17, 1972, the 15,007,034th Volkswagen Beetle was produced, breaking the record held by the Ford Model T for over four decades.? However, VW was facing up to a huge strategic weakness with the Beetle representing the vast majority of its sales.

Volkswagen's sales in the US dropped from around 570,000 to just under 486,000 between 1970 and 1972.?The response from Volkswagen was to invest and develop a new model range and update its production process. The rest is history.

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Mean whilst the brands that make up Stellantis were individually struggling as previously protected markets opened up and they could no longer hide their lack of customers behind protectionist barriers or nationalist buying behaviours. One struggling OEM merged with another to create the entity in place today. Stellantis is still a top 5 vehicle manufacturer but sales are on the decline.

?I think it currently looks more like a British Leyland than a Volkswagen.

In Europe it has brands competing for the same customer with similar products – Vauxhall/Opel and Peugeot and Citroen are more akin to Austin and Morris than Cupra and say Skoda.

Whilst there were bright spots Stellantis Group marque Vauxhall ended the year as the UK's best-selling electric car brand across both retail and Motability channels. The success of models like the Corsa Electric and Mokka Electric helped Vauxhall achieve this milestone. In France Stellantis maintained its leading position with an increase in registrations and over ?30% market share. In Germany it held a 14% market share with growth in sales from brands like Peugeot, Citro?n, and Fiat

?But there were plenty of bad news for the group. Through 2024, Stellantis' market share in the U.S. declined to 11.5%, down from 13.5% with most of its nameplates having a very challenging year. Overall sales dropped some 15% to 1,303,570 vehicles compared to 1,527,090 vehicles in 2023.:

• Jeep: Sales fell by 9% to 587,725 units. The Grand Cherokee and Gladiator saw significant declines2.
• Ram: Sales dropped by 19% to 439,039 units, with the pickup line-up experiencing a notable decrease.
• Dodge: Sales plummeted by 29% to 141,730 units

Stellantis' results were notably worse than those reported US based General Motors and Ford Motor Co.

Back across the pond in Europe Stellantis' production in Italy dropped significantly by 37% compared to 2023, with fewer than 500,000 vehicles produced

Financially Stellantis did make lots of money in 2024 with reported net profit of €5.6 billion for the first half of 2024 which ?was down some 48% compared to the first half of 2023. Net revenues for the first half of 2024 were €85.0 billion, a 14% decrease compared to the first half of 2023. They also completed a €3 billion share buyback program, returning a total of €7.7 billion to shareholders in 2024.

Stellantis is only in its fifth year as a Group and is looking for a new CEO after Carlos Tavares resigned – he celebrated 2023 with nearly $20 billion in profits however this year, profits have plummeted, contributing to Tavares leaving.

Stellantis dealers attributed “reckless short-term decision-making” in order to secure those profits as leading to the “rapid degradation” of the company’s American brands.

Returning money to share holders and not to investment in new product is something that sounds like the ?some UK car companies may have been guilty of. People have only so much loyalty before their attention is drawn to new exciting competitor offerings.

Profits can be won in the short term by cutting costs either directly from sales and marketing expenditure and by extending product life cycles. Both lead to further decline in sales and ultimately profits.

If this is the chosen path than there has to be for Stellantis ?at some point both brand consolidation and supply chain optimisation. Market share will fall if marketing spend jam is spread to thinly across its multitude of marques. More factories will be shuttered and some brands set free to who knows – another Chinese OEM looking for market place brand recognition – another BL.

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