Break out the wacky waving inflatable air-flailing tube men and balloons tied to sideview mirrors because discounted new vehicles are on their way back. At least, that’s according to Stellantis boss Carlos Tavares.
“Pricing power will be under pressure, which means we are back to the situation we knew a few years ago,” he told the Financial Times. “We all have to go back to the fundamental sales and marketing tactics that for the last three years have just disappeared.”
Customer orders would buffer any discounts until the latter half of this year, but Tavares said the market would return to something more recognizable to pre-pandemic life at some point relatively soon. That would be welcome news to new carbuyers’ ears, but Tavares made clear that it wouldn’t be exactly like before. That’s because manufacturers and dealers have learned how to run leaner, more profitably, and with fewer days on lots than they previously thought was possible. Wrestling away gold from Fort Knox might be an easier task than convincing automakers and investors to delay profits in the name of market share.
Stellantis recently recorded a better-than-expected profit for 2022, a result of the combination of high-margin vehicles, lower break-even points, and recovering inventory. High-interest rates may have damped some enthusiasm for car shoppers, although Tavares says the company would withstand lower sales volumes with higher margins.
That bodes well for Stellantis investors, although it may not be sustainable forever. The circle of life for car sales usually involves a cyclical profitability phase followed by a market-share phase where automakers compete for a larger customer base to extract aftermarket and service revenue from later. With the oncoming shift to electrification, and its lower service costs, that may change, but at least one automaker sees relief ahead for buyers reeling from less inventory and higher prices.
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