Stellantis Chief Muses EV Margins, Targets Tesla

Matt Posky
by Matt Posky

stellantis chief muses ev margins targets tesla

On Wednesday, Stellantis CEO Carlos Tavares suggested that Tesla’s profitability was on the decline due to the automaker having to confront some of the issues of a legacy manufacturer.

"They are entering my world, the world of tight pricing, cost competitiveness, and the operational issues that a big company like ours may face," Tavares told the press during a presentation of Stellantis’ half-year financial report. 

Since everyone loves a little industrial drama, the statement became national news. But is Tesla really on the decline because it’s finally on the level of other multinational automakers or is Tavares just coping? 

"The result of the fact that Tesla is now entering my world, is that their profitability moved from more than 17 [percent] in the first half of 2022 to 10.5 [percent] in the first half of 2023," the CEO was quoted as saying by Reuters. "They were more profitable than Stellantis, now they are less profitable than Stellantis.” 

Tavares repeatedly suggesting that Tesla is now entering into his world is sincerely cringey. But he’s not wrong about the company's finances. The only problem is that things aren’t so simple when you look at them on a quarterly basis. If you just focus on Q2, Tesla still looks pretty good. 

The EV brand reported adjusted earnings of $3.1 billion ( 91 cents a share) which is up 20 percent from the second quarter last year. That’s higher than analysts were targeting and the same can be said of its profit margins. Tesla enjoyed a profit margin of 18.2 percent in Q2. 

While that’s still smaller than the 25 percent enjoyed in 2022, it’s hardly a dismal failure and doesn’t tell the whole story. Automotive revenue was up 47 percent this quarter, excluding revenue from the sale of regulatory credits, and sales volume jumped up a whopping 83 percent — showcasing that Tesla looks to be chasing volume, rather than trying to maximize its margins. 

That seems to go against the premise that the brand is now trying to play the same game as legacy manufacturers. Keep in mind that Tesla doesn’t just sell EVs, it also owns what’s about to become the dominant mode of charging electric vehicles away from home. 

“Our operating margin remained healthy… even with price reductions in Q1 and early Q2,” Tesla said earlier this month. “The challenges of these uncertain times are not over, but we believe we have the right ingredients for long-term success.”

Meanwhile, Stellantis has announced a rise in its revenue and operating profit for the first half of this year with a margin on adjusted EBIT almost unchanged at 14.4 percent. But that also beat the estimates thrown around by market experts. 

"What has been said by the Tesla CEO [Elon Musk], whom I respect totally, is that they prefer growth to profitability. And we'll see to which extent they will be also challenged by the Chinese," Tavares continued. 

"If we are racing for the bottom in terms of facing the Chinese with price cuts, Tesla will have problems with that strategy before we do, because we are more profitable than Tesla.”

This is pretty tough talk from a company that doesn’t sell a lot of EVs inside of North America. Stellantis is supposed to deliver an affordable EV (starting below $27,000) next year. But Tesla remains the top dog in terms of volume by a staggering margin and has started lowering its prices in anticipation of more direct competition. 

We cannot say how things will play out in the future. But Tavares seems to be intentionally ignoring the larger picture here. Stellantis has loads of desirable products that your author would happily park in his driveway. But there’s not a chance in hell I would take one of its EVs over a Tesla and I’m not even terribly fond of the American brand. 

While it’s undeniable that Tesla has to exist in the same world as other manufacturers and couldn’t rely on hype forever, the brand is doing what it can to grow swiftly and ensure it remains relevant on the global market. 

Meanwhile, Stellantis’ leadership allegedly wants half of its sales in the United States (and all of its sales in Europe) to be entirely electric by 2030. But meaningful headway is only being made in Europe. North American sales are still totally dominated by gasoline-powered models (a few of which are about to be discontinued) and yet the market still comprises 57 percent of Stellantis’ adjusted operating income and just about half of its total revenue.

The earnings report offered by Stellantis seems to showcase that the company is in good health. But it doesn’t appear to be playing the same game as Tesla, especially when it hasn’t figured out how to make EVs work for its bottom line.

[Image: Stellantis]

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5 of 31 comments
  • Tassos Tassos on Jul 28, 2023

    Elon Musk is a far smarter guy than ANY Legacy CEO, even this guy.

    Musk is not only a BRILLIANT Scientist AND Engineer, who has been able to solve COUNTLESS big problems legacy makers are not even aware of,

    Musk's EPIC achievements at SPACEX helping NASA lower its costs by a FACTOR OF TEN also shows that Musk is ALSO not an Econ Illiterate like Most Americans, but is keenly aware of economics and cost issues too, AND SOLVES THEM.


    AND BTW, some clown asked an admirer of Musk when he is getting his Tesla. THis is UTTERLY IRRELEVANT. EVs are NOT for everybody. ALSO, with the Exception of the Model S and the Mercedes EQS, there is no other (among 100s) of BEV models I would care to own.

    If somebody praised ROlls Royce or Bentley, nobody asks them when they are buying theirs. Same with a Porsche, Ferrari or other HIGH ACHIEVER automaker. I don't have to buy their product, OR their SHares, to prove the obvious.

    • See 1 previous
    • Art_Vandelay Art_Vandelay on Jul 28, 2023

      There are decade old model S’s out there (not mine). So why don’t you grab one. Even a first gen is nicer than some janky old benz

  • Ollicat Ollicat on Jul 28, 2023

    What is funny is that I remember when all these car companies were combining and buying each other out because it was going to save costs to be bigger. Now we are told that when Tesla was small, it was profitable but when it gets big like Stellantis then it will be unprofitable. I will never understand corporate speak.

    • Jeff S Jeff S on Jul 29, 2023

      "What is funny is that I remember when all these car companies were combining and buying each other out because it was going to save costs to be bigger"

      That is something I have heard most of my life whether it was a merger in the oil, retail, auto, finance, and many other industries. The result is there is less competitors thus less competition and usually higher prices. Much of that talk is to get governmental approval and to convince stockholders of higher earnings and lower prices to the consumer. More of a promise than fact.

  • SCE to AUX A question nobody asks is how Tesla sells so many EVs without charge-at-home incentives.Here are some options for you:[list][*]Tesla drivers don't charge at home; they just squat at Superchargers.[/*][*]Tesla drivers are rich, so they just pay for a $2000 charger installation with the loose change in their pocket.[/*][*]Tesla drivers don't actually drive their cars much; they plug into 110V and only manage about 32 miles/day.[/*][/list]
  • SCE to AUX "Despite the EV segment having enjoyed steady growth over the past several years, sales volumes have remained flatter through 2023."Not so. How can EV sales be increasing and flatter at the same time? and H/K/G are all up for EV sales, as are several other brands.
  • ToolGuy Here is an interesting graphic, if you're into that sort of thing.
  • ToolGuy Nice website you got there (even the glitches have glitches)
  • Namesakeone Actually, per the IIHS ratings, "Acceptable" is second best, not second worst. The ratings are "Good," "Acceptable," "Marginal" and "Poor."