01, Stellantis has a lot of money and directly criticizes the Italian government and Chinese car companies
"The introduction of Chinese competition is a huge threat to Stellantis, we will fight, when you fight there can be casualties, but don't expect us to win without a trace".
A few days ago, Carlos Tavares, the chief executive of Stellantis, Europe's second-largest automaker, said that Stellantis may have to close some of its Italian factories if Chinese competitors are allowed to produce cars in Italy.
Hearing this, Chery Automobile, which planned to build a factory in Italy, quickly fled and went to Spain to negotiate.
Directly to the local government in Italy, Stellantis does have deep pockets, because it has far leading earning power.
As a result of making money, Stellantis CEO Tang Weishi received 36.5 million euros ($38.8 million) in compensation for fiscal 2023, a year-on-year increase of 56%.
In 2023, with an operating profit of 24 billion euros and a net profit of 18.6 billion euros (about 140 billion yuan), Stellantis will surpass Volkswagen, Mercedes-Benz, BMW, General Motors, and Tesla to become the most profitable auto group in Europe and the United States.
You may still be a little unfamiliar with Stellantis, the group was created in 2021 after the merger of Fiat Chrysler and PSA Group, it can be said that Italy is its birthplace, and the group owns Alfa Romeo, Citroën, DS, Fiat, Jeep, Lancia, Opel, Vauxhall, Chrysler, Peugeot and many other brands.
02, relying on the European and American markets, Stellantis' profitability has risen
Since 2014, when he became the head of PSA, Tang Weishi developed a strategy to maximize profits per vehicle while cutting costs (such as layoffs) before the pandemic.
Shareholders have readily approved compensation payments to the top management, including a whopping 36.5 million euros ($38.8 million) from CEO Tang Weishi, up 56 percent year-on-year.
Tang Weishi was not "completely satisfied" with last year's results, saying that the group's successful "value over production" strategy could not be sustained indefinitely, adding that 2024 would be another challenging year, with rising labour costs as headwinds and falling raw material costs as headwinds.
In 2023, Stellantis ranked fourth in the world with 6.4 million units sold, but it is one of the most profitable automakers in the world, surpassing any rival except Toyota Motor Group, which has not yet announced its 2023 financial results.
According to the 2022 results, Toyota's net profit was 17.7 billion euros, while Stellantis' was 16.8 billion euros, and BMW ranked first with a net profit of 18.6 billion euros.
In fact, not only Stellantis, but also the entire European, American, Japanese and South Korean car companies will make a lot of money in 2023. The net profit of Europe's six largest automakers totaled a record €66.7 billion in 2023, up slightly from €66.2 billion in 2022, and Toyota expects net profit to reach $29.4 billion in fiscal 2023, three times that of General Motors.
Operating margins (operating profit as a percentage of revenue) also rose. The figures for the six European automakers were 5.5% in 2019, fell to 4.8% in 2020, rose to 10% in 2021, and remained in double digits for the next two years, including 10.3% in 2023.
Stellantis is the only company with a regional breakdown of its performance, with North America contributing more than half of the 24.3 billion euros in operating profit in 2023, more than a quarter of the profit coming from Eastern Europe and Turkey, and almost negligible in the Chinese market.
In contrast, German automakers are much more dependent on the Chinese market. According to a 2020 report by Bernstein Analytica, more than 50% of the after-tax revenue of the German automotive industry in 2019 came from China. Although this share has decreased in recent years, China is still the largest market for major German automakers.
03, Stellantis' China business is pitiful, but it has a stake in Leap
Stellantis' financial statements don't bother to separate the Chinese market, because it's so small that it can only be combined with India and the Asia-Pacific region.
Combined, Stellantis will only sell 154,000 units in 2023, less than a fraction of its global sales of 6.4 million units.
The Chinese market is really a bit pitiful, and after GAC FCA's exit, Stellantis' business in China is almost only left with Dongfeng Shenlong Automobile, a joint venture with Dongfeng.
Shenlong also has little presence in the Chinese market. From 2020 to 2023, the sales volume of DPCA will be about 50,000, 100,000, 120,000, and 72,000 units, respectively, and at its peak, the annual sales of DPCA exceeded 700,000 units.
According to public information, its sales in the first quarter of this year were about 10,000 units, and foreign shareholders Stellantis did not give much support.
Unable to beat China's new energy vehicles, Stellantis chose to join.
In October last year, Stellantis spent about 1.5 billion euros (about 11.5 billion yuan) to acquire a 20% stake in Leapmotor, a new Chinese car maker. In addition, Stellantis and Leapmotor will form a joint venture "Leapmotor International" with a ratio of 51:49. In addition to Greater China, the joint venture has exclusive export and sales to other markets around the world, as well as the exclusive right to manufacture Leapmotor products locally.
Tang Weishi said that now is the best time for Stellantis to support Leapmotor and play a leading role, and Stellantis will also profit from Leapmotor's competitiveness in China and other markets.
04, China's auto profit margin is less than 5%, and the largest auto group only makes a profit of 14.1 billion
The 1.5 billion euros is a piece of cake for Stellantis, and it is like grasping a lifeline for Leap, ensuring its survival.
The volume of China's auto market has become famous, in the case of serious overcapacity of production capacity, models and brands, everyone has taken up the weapon of price war, and the result is that the profits are meager, and many car companies have been in danger.
In a sense, profit is a more important metric than sales volume. Only by obtaining sufficient profits can we attract more and better talents, develop better products, and ensure long-term competitiveness.
Let's take the leader BYD as an example, which sold 3.02 million vehicles worldwide last year, nearly half of Stellantis, but the profit was only 30 billion yuan, about 1/5 of the latter.
Great Wall Motors, whose profit margin was once proud of the world, sold 1.23 million units last year, equivalent to 1/5 of Stellantis, but its net profit of 7 billion yuan was only 1/20 of Stellantis.
SAIC, the largest automobile group in China, sold 5.02 million vehicles last year, but only made a profit of 14.1 billion yuan, equivalent to 1/10 of Stellantis.
Looking at the poor new car-making forces, NIO delivered about 160,000 new cars last year, with a loss of 21.1 billion yuan, and Xpeng delivered 140,000 vehicles last year, with a loss of 10.4 billion yuan. By the way, both only sell pure electric vehicles.
To add insult to injury, at the beginning of the Year of the Dragon in 2024, BYD started with the "Glory Edition", bringing the entire auto market into a more tragic price war, and the price benchmark has moved down by 20,000 yuan, making the profitability of the industry even more precarious.
According to the statistics of the China Association of Automobile Manufacturers, the total output value of the automobile manufacturing industry in 2023 will exceed 10 trillion yuan, the profit will be 508.63 billion yuan, and the profit margin will be about 5%, which is lower than the level of the entire manufacturing industry.
As recently as 2015, the auto industry's profit margin was 8.7 percent, which is now half the story.
Profit margins in the automotive industry have remained at a low level of 5%. Source: China Association of Automobile Manufacturers
In its March sales analysis, the Federation said: "Due to excessive competitive pressure, profits mainly come from exports and high-end luxury, and the profits of most other companies have declined sharply, and the survival pressure of some companies has increased." At present, the fuel vehicle business is still profitable, but it is a small profit, and the market size is shrinking rapidly; new energy vehicles maintain a medium and high speed of growth, but the loss is large, and the contradiction and pressure are greater. (Text|.) DA Bin)