Stellantis and Its Dealers Forced to Cope with Excess Inventory

Since the end of the pandemic, the auto industry has experienced record profits, driven by high sales and unprecedented monthly payment rates due to low inventories. However, the market dynamics are shifting rapidly, and Stellantis finds itself facing an overabundance of inventory, a stark contrast to its previous situation.

Market Dynamics Shift – 

In the immediate aftermath of the pandemic, auto companies thrived on high transaction prices and minimal incentives. The market has since taken a turn, fueled by even higher interest rates, inflation, and climbing vehicle prices. Now, Stellantis is struggling with excess inventory that would have been easily sold over a year ago. As a result, numerous Stellantis vehicles are sitting idle on dealer lots.

Consumer Impact – 

Ivan Drury from Edmunds Automotive highlighted in an interview with Local 4 Detroit Business Editor Rod Meloni the challenge for consumers: while a wide selection of vehicles with specific features is advantageous, it becomes problematic if these vehicles are unaffordable. Rising interest rates have made monthly vehicle payments prohibitively expensive for many, leading to potential loan denials or consumers simply being unable to afford payments that exceed $1,000 a month.

Currently, Stellantis vehicles spend about 100 days on dealer lots, compared to the industry average of 50 days. The company also faces challenges with its average transaction prices, with most vehicles priced well above $30,000. Unfortunately, Stellantis only has one vehicle in its American portfolio that sits below the $30,000 with the 2024 Jeep® Compass Sport 4×4 with a starting MSRP of $27,495 (including destination).

Erin Keating from Cox Automotive told Meloni, that Stellantis vehicles are about 120% to 125% above the average transaction price of vehicles from other automakers. The situation presents opportunities for consumers seeking deals. With Memorial Day around the corner, dealerships are likely to offer significant discounts to clear out older inventory.

Stellantis’ Response – 

In a response, Stellantis released a statement saying…

“Our incentive strategy remains aggressive, and focused on region opportunity. New retail strategies provide additional flexibility for our dealers, to focus offers where they think they can maximize sales and address older inventory.”

New Price Reductions – 

Stellantis has also announced price reductions on several models:

• Jeep® Grand Cherokee and Dodge Durango: Starting prices will be lowered by $4,000, depending on the model.
• Ram 2500 / 3500 Heavy Duty Pickups: Discounts of $9,000 on 2024 models.
• Chrysler Pacifica and Pacifica Hybrid: Reduced by $2,660 on Hybrid, and $2,000 on select gas models.

These measures, however, may not be enough to counter the broader market challenges Stellantis faces, although they do provide a good starting point. The evolving market landscape demands a more adaptive and robust approach.

With three new battery-electric vehicles (BEVs) launching this year, it will be interesting to see if Stellantis will offer competitive pricing compared to their internal combustion engine (ICE) counterparts, or if they will continue with premium pricing. If the latter, these new BEVs might end up sitting on dealership lots alongside the current excess inventory, further complicating the company’s strategy to balance supply and demand.

Source: Local 4 Detroit / WDIV