Fiat owner has surpassed its German rival in market value.
There has been a reshuffle on the world’s automotive podium. Volkswagen lost the crown as the world’s largest carmaker by sales to Toyota in 2016 in the wake of its diesel emissions scandal. Now it has seen its fiercest European rival Stellantis eclipse it in market value.
Shares in Stellantis are up nearly 30 per cent since late January, valuing it at €80bn, while VW is valued at €63.8bn, about half what it was worth in 2021. In one sense, the companies are obvious rivals: each owns about a dozen brands from supercars such as VW’s Lamborghini and Stellantis’s Maserati down to more budget offerings. In the latter, VW has Škoda while Stellantis produces Fiat vehicles. Both companies are globe-spanning.
The auto industry is facing a number of existential, yet simultaneous, challenges: the uncertain pace of the shift to electric vehicles, growing competition from Chinese exports, geopolitical trade risks and the collapse of western brands in China. The two carmakers see broadly the same data — yet come to markedly different approaches to these challenges.
First, electrification. Stellantis has bet on “multi-energy” platforms that allow it to make hybrid, petrol and electric cars on the same production line. When demand for one type falls, the same workers can increase production of alternatives. VW has opened new factories dedicated to electric-only models, which has led it to scale back production as EV appetite slows.
VW is also hugely dependent on China — historically the source of about half its profits. It is already bleeding market share. Once, one in five cars sold in the Chinese market were from the German group. Its market share in electric is less than 5 per cent. Many executives who have worked in the market privately admit that western carmakers’ days there are numbered. The business cannot count on Chinese money forever.
Stellantis has also taken a unique approach to China, a market where it historically struggled. A deal last year with Chinese start-up Leapmotor will, Stellantis believes, help it in the country while also giving it a slice of every EV sold outside of China by the fledgling group.
Even their approach to remote working is different. VW’s head office is the sprawling complex of Wolfsburg. Stellantis meanwhile has been downsizing or selling offices while encouraging remote working. Some worry that the company’s cost-cutting will eventually come back to bite it. But investors have rewarded its record so far: last year it made adjusted operating profit margins of 12.8 per cent. Mercedes-Benz, by contrast, made 12 per cent.
A favourite hobby of hedge funds is to draw up a list of which carmakers are most vulnerable in the long run. VW is frequently the top pick. Porsche is a cash machine but the core brands barely make money and apart from China, VW is heavily reliant on Europe, a market that will come under growing siege from cheaper Chinese models. Then there is VW’s bet on the US, an $8bn gambit on the resurrection of the Scout brand. Trying to crack the US market was what originally led to dieselgate.
Stellantis is not without its challenges. The company still faces the unenviable task of fully integrating its French, Italian, German and US operations — no mean feat. But Stellantis has strengths, not least a vibrant US operation, with the profitable RAM pick-up trucks and Jeep vehicles.
Yet ultimately this is a tale of two cultures. VW carries a swagger; executives brim with quiet confidence that the business will ultimately be fine. After all, it is VW! The gulf with Stellantis could not be starker. Stellantis’s chief executive Carlos Tavares, who joined a nearly bankrupt Peugeot in 2014 and has helped forge Stellantis by buying Opel and then merging with Fiat-Chrysler, often talks of a “Darwinian era” facing the industry. Each business that formed Stellantis came from a death or near-death experience. Fiat was almost bust in the early 2000s. Chrysler was bankrupt. Peugeot was bailed out in 2014, while Opel was sold by General Motors after decades of accumulated losses.
This suffuses the business with a survivalist mentality and a sense of urgency. I remember once trying to get Jean-Philippe Imparato, head of Stellantis’s struggling Alfa Romeo brand, to open up about sales targets. He slammed the table. “I do not care about sales. I only care about unit margin,” he thundered. “At Stellantis, you make money or you die”.
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