*

Under Tavares leadership group lost significant market

share in

Europe

*

Inflation-hit consumers, dealers view some Stellantis ( STLA )

models as

expensive

*

Group shares are down more than 40% this year

*

Competition from Asian automakers undermined Stellantis' ( STLA )

pricing

strategy

By Giulio Piovaccari, Alessandro Parodi and Inti Landauro

MILAN, Dec 2 (Reuters) - When 24-year-old Elena Aragon

set out to buy a new car, she reviewed a range of no-frills

brands in her home town of Cadiz, Spain, including Stellantis' ( STLA )

Fiat and Peugeot.

In the end, she bought a Hyundai.

"The basic models for Fiat and Peugeot didn't appeal to me.

But the more advanced ones, with the features I wanted, were too

expensive," said Aragon, who opted to buy an i20 compact car

with sensors for blind spots and a rear-view camera.

"I got a sweet discount and ended up paying 17,000 euros,"

the instructor at an air traffic controller school said.

Aragon's choice highlights a problem that had afflicted

Stellantis ( STLA ) under CEO Carlos Tavares, who quit

abruptly on Sunday: rising prices at its mass-market marques

have driven away inflation-hit customers, according to Reuters'

interviews with five car dealers, five consumers, two auto

industry executives ahead of his resignation and a review of

pricing data by market research firm JATO Dynamics.

Tavares, who had led Stellantis ( STLA ) since it was forged in

January 2021 from the combination of Peugeot-owner PSA and Fiat

Chrysler, had flattered investors with rapid post-merger cost

cuts and boosted operating profit margins to around 13% last

year, nearly twice those of rivals Volkswagen and

Renault.

But his good start ran out after slumping sales and bloated

inventories in the more profitable North American market led the

group to issue a profit warning in September and later announce

he would retire in 2026.

While investors focused on Stellantis' ( STLA ) well-flagged U.S.

travails, the group is however also struggling in its core

European region, the Reuters review shows.

Under Tavares' leadership, Stellantis ( STLA ) lost a third of market

share in Europe. Over the same period, Fiat's market penetration

in Europe halved to 1.8%, while Citroen's shrunk to 2.2%, data

from European car association ACEA show.

Stellantis' ( STLA ) top investor is the Fiat-founding Agnelli family

through investment company EXOR led by John Elkann.

The group said on Sunday it accepted Tavares's resignation

"with immediate effect" and that Elkann would chair a new

interim executive committee. Milan-listed shares were down 7% at

0834 GMT, their lowest since July 2022.

The European car dealers who spoke to Reuters point the

finger at Tavares' focus on efficiency and margins.

"Low price models have progressively gone missing from

Stellantis' ( STLA ) range," says Alberto Di Tanno, founder of dealership

group Intergea, which runs 169 outlets in Italy and Switzerland.

For example, the Ypsilon model from Lancia, one of 10

Stellantis brands available in Europe, "was a 17,000 euro car.

Now, suddenly, it costs no less than 25,000 euros," said Di

Tanno.

In September, the average retail price of a Stellantis ( STLA )

passenger car in eurozone's 14 largest countries stood at nearly

40,000 euros, above the average for other mass-market

competitors, JATO Dynamics data provided to Reuters show.

Cars from China's Saic, which owns British brand

MG, went for 32,500 euros while models for Renault, Mitsubishi ( MSBHF )

and Suzuki cost on average less than 29,000 euros.

Since 2021, prices at Stellantis ( STLA ) have risen in each of

Europe's five largest markets - Germany, France, Italy, Spain

and United Kingdom. Hyundai and Toyota ( TM ) have

also hiked prices in these markets, but Volkswagen and Renault

cut them.

"Prices are rising for the Stellantis brands, but customers

still look at many of them as mass market," said JATO Senior

Analyst Felipe Munoz.

A former veteran sales executive at Stellantis ( STLA ) told Reuters

that the higher price policy, as well as aggressive cost cuts,

was part of Tavares' push for double digit operating income

margin, particularly after the Covid pandemic.

Stellantis' ( STLA ) struggles in Europe mirror some of the issues

the company had been grappling with in North America with

premium brand Jeep.

Erin Keating, executive analyst at Cox Automotive, said

buyers have been shocked by the fact that Jeeps that retailed

for $35,000 in 2019 shot past $60,000 this year, with some

models even priced above $100,000. The cost of these models was

tough to swallow for many buyers who prioritized Jeeps for their

ruggedness and affordability.

"He chased profits. They shot the prices up of the vehicles,

and I think what he forgot to do was to check, 'Who is my U.S.

consumer?'" Keating said of Tavares.

Stellantis ( STLA ) has told Reuters it's planning to launch

approximately 20 new models in the next months, across all

segments, aiming for a 20% market share in the European Union.

These include the Citroen C3, which starts at 23,000 euros

in its electric version but costs less than 15,000 euros with a

combustion engine.

FAILED AMBITION

Like with other European carmakers, Stellantis' ( STLA ) problems in

Europe had been exacerbated by fierce competition from Asian

rivals, including from Hyundai and Toyota ( TM ).

Chinese automakers including BYD, which

collectively account for around 5% of European auto sales and

could command a 12% market share by 2030 according to consultant

AlixPartners, undermined Stellantis' ( STLA ) offerings.

The small Fiat 500, traditionally associated with affordable

mobility, is on sale only as an electric vehicle, for about

29,000 euros.

"(Stellantis' ( STLA )) prices are not the right ones," said Tony

Fassina, founder of one of the biggest car dealers in Milan,

Italy. "At the appropriate prices demand is there."

Herman Claes, chairman of the Stellantis Retailer

Association for Belgium and Luxembourg, said more and more

Stellantis ( STLA ) dealers in the region had started to offer other

marques to compensate for slower sales, to the advantage of

Chinese automakers.

The group's complexity has also been an issue.

With 14 brands globally, Stellantis ( STLA ) owns the largest number

of marques among traditional automakers. After spinning off

Porsche in 2022, Volkswagen operates nine brands. Toyota ( TM ) owns

just three.

Stellantis' ( STLA ) wide portfolio has however failed to ensure

clearly differentiated products: Fiat and Citroen compete in the

cheaper segment, Jeep and Alfa Romeo in the premium space.

To secure savings, Stellantis' ( STLA ) mid-sized vehicles are being

developed on the same STLA Medium technology platform, while

smaller cars use Peugeot's CMP platform.

"Many Stellantis ( STLA ) models overlap," said Plinio Vanini, owner

of Italy's largest dealership group Autotorino.

($1 = 0.9477 euros)