It might sound a bit familiar; just replace “avoid mediocrity” with “no boring cars” and legacy automaker Stellantis (STLA) might as well be legacy automaker Ford (F). But that is the battle plan of new CEO Antonio Filosa, and one that will be tough to carry out in a landscape packed to the gills with challenges. And investors are not buying it either…or buying in. Stellantis shares are down better than 2% in Monday afternoon’s trading.
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The landscape is lousy for Stellantis right now, reports note. We know that, not so long ago, Stellantis had some labor troubles with contract negotiations, and things have not exactly gotten a lot more amicable since. Dealerships are not exactly happy with Stellantis either, and when you combine sluggish market share numbers with mounting regulation, the environment is very much a hurting thing. Top it all off with car buyers badly fatigued by post-pandemic price inflation, and the whole picture could not be much worse for Stellantis.
Thus the new CEO’s rallying cry: “reject mediocrity.” Considering Filosa started out as a paint shop supervisor, he has seen the business from nearly every angle. It also helps that he is referencing the past, as this was a stance that Sergio Marchionne, former Fiat Chrysler CEO, took routinely. Now, Filosa will be left with a fractured industry and an equally fractured market, left to manage a transition period as drivers move from gas to electric, but only in some cases.
The Death of Fuel Efficiency
Meanwhile, one of the key features of regulators—the Corporate Average Fuel Economy (CAFE) scale—is coming under fire, to the delight of car makers everywhere. CAFE violations may soon set companies back a whopping $0, allowing them to make virtually any kind of car that they think will sell without regard to its fuel efficiency.
But there is another reason that Stellantis in particular is welcoming the death of CAFE: fleet refresh. CAFE standards are “nearly impossible,” noted Alliance for Automotive Innovation president and CEO John Bozzella. Thus, the chances that businesses may keep their old fleets on the road for longer—and in the process, eschew any kind of “greener” technology—are elevated. With CAFE out of the picture, Stellantis and its contemporaries can develop better technology at more reasonable speeds. Thus, the new technology is more likely to work reliably and be adopted by its targeted end users.
Is Stellantis Stock a Good Buy Right Now?
Turning to Wall Street, analysts have a Hold consensus rating on STLA stock based on three Buys, 10 Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 54.54% loss in its share price over the past year, the average STLA price target of $11.25 per share implies 22.48% upside potential.
