MILAN -- Stellantis posted record results for the first half despite headwinds including raw material inflation and semiconductor scarcity.
CFO Richard Palmer said the strong performance was supported by sales of high-margin vehicles, including electrified models.
Adjusted earnings before interest and tax rose 44 percent on a pro-forma basis to 12.4 billion euros ($12.7 billion) in the January-June period, the automaker said on Thursday. Stellantis, created from the merger of Fiat Chrysler and PSA Group, does not report quarterly financial results.
First-half margin rose to 14.1 percent from 11.4 percent a year earlier, with a record 18.1 percent in North America, where the group made almost half of its sales in the six months, and a double-digit result for all of the group's five regions.
Stellantis this year rolled out an ambitious plan to double annual revenues by 2030 and turn its range from traditional combustion engines to EVs.
"We are ahead of Tesla in Europe in electric vehicle sales, and not far from Volkswagen," Palmer said on Thursday.
CEO Carlos Tavares said Stellantis, whose brands include Jeep, Ram, Chrysler, Dodge and Fiat, was "delivering an outstanding performance and executing its bold electrification strategy."
"We are shaping Stellantis into a sustainable mobility tech company that is fit for the future," he said.
Palmer said that the group, though its range of premium vehicles, was well placed to cope with the global rise in inflation.
"We will look to pass rising inflation costs to customers on the market until feasible," he said.
Net pricing accounted for over 5.8 billion euros ($5.9 billion) of the overall operating income in the first half, Stellantis said in slides prepared for its earnings presentation.
Foreign exchange also supported the results, with Palmer saying a stronger dollar contributed to the first-half adjusted EBIT to the tune of around half a billion euros.
North America gains
In North America, net revenue rose 31 percent to $43.2 billion, and the automaker said it achieved a record 18.1 percent adjusted operating margin for the region. Adjusted operating income for North America was $7.8 billion.
Tavares said the record profit margin “demonstrates a very high level of efficiency and effectiveness” that is comparable with rival manufacturers.
Shipments in the region rose 10 percent to 959,000, which the company largely attributed to strong demand for the Jeep Wagoneer, Grand Wagoneer, refreshed Compass and Grand Cherokee L and the Chrysler Pacifica, but the total was “partially offset by lower volumes of Ram pickups, Dodge Durango and discontinued Grand Cherokee WK.”
Tavares said the company’s average transaction price, which he said is the “highest among our peers,” is driving revenue. TrueCar said Stellantis’ average transaction price was $53,654 in the quarter.
The Dodge Challenger and Charger logged their highest-ever transaction prices in the first half at $47,000 and $44,000, respectively. Tavares the muscle cars are a “very nice niche business that is now being prepared for full electrification with some amazing innovations that will bring even more passion from the fans of this brand in the near future.”
The Wrangler 4xe, the company said, was the top-selling plug-in hybrid in the U.S., with 19,000 units sold through June.
The automaker is looking to replicate the success it’s seeing in Europe with EVs in North America.
EV sales rising
Battery-electric vehicle sales for Stellantis rose nearly 50 percent globally to 136,000 in the first half of 2022.
The electric Fiat 500 sits atop the BEV sales race in Germany and Italy, while the Peugeot e-208 is the No. 1 BEV in France. Stellantis said it had a 19.2 percent market share in the Europe for low-emission vehicles.
“We see that we are gaining momentum on the BEV sales business,” Tavares said during an earnings presentation. “We see that in Europe we are now in the leading pack. We have some leading models in the different markets. We are bringing the EV technology to the U.S. and the U.S. represents for us in terms of developing our EV technologies, a very significant, profitable opportunity.”
While the automaker’s EV sales are ticking up, profitability for battery electric models is a concern for Tavares.
Tavares said full EVs are more expensive to build than their internal combustion counterparts, and that battery-powered models are still “very much dependent” on subsidies available to consumers.
He says the costs of the raw materials needed to build EV batteries could be at the mercy of “geopolitics.”
“I suppose that everybody in the world has supply contracts that are very much indexed on the price of raw materials, which means that price of raw materials across the automotive industry may be a pass through on the price of batteries,” Tavares said.
“That's why so many people are trying to control the raw material supply, which then means we may have a situation where at one point in time that we are back to the same level of profitability. And then if something happens in terms of geopolitics, or even supply chain, the next day you might have a strong inflation on some of those rare materials and then your cost goes through the roof and your margin is hurt.”
Although there are still questions about the profitability of EVs, Tavares said margins for plug-in hybrids are getting close to matching gasoline-powered models.
“On the PHEV products, we are almost there,” Tavares said during a media roundtable Thursday. “We are almost there because the PHEV products bring a lot of additional value in terms of drivability, acceleration, combined zero-emission range downtown with the high-range capability when you go in the countryside.
"So there is value in the PHEV technology that the customer is willing to pay for. And, as a consequence, the per-unit margins of PHEV products are almost on par with ICE, so almost done. I think it's going to be the case this year.”
Slower Europe growth
Stellantis confirmed its full-year outlook for a double-digit margin and positive industrial free cash flow, but significantly lowered its predictions for growth in several key markets. It now expects the wider European and North American markets to shrink 12 percent and 8 percent this year, after previously seeing a 2 percent decline and stable sales, respectively.
The company’s global unit sales fell 7 percent to 2.93 million vehicles in the first half as persisting supply-chain issues including the semiconductor shortage curbed production.
Scarcity of chips "will continue to be an issue for the industry through the end of the year," Palmer said. "I think it’s improving but it’s a slow process."
Palmer took aim at what he called "bullish" forecasts of improvements in semiconductor supply in the second half of the year by some rivals, saying Stellantis has no evidence of that and will remain prudent.
The company had just under 4 billion euros in extra costs in the first half, including 3 billion euros from higher prices for raw materials.
Vince Bond of Automotive News, Reuters and Bloomberg contributed to this report