Stellantis U.S. Price Cuts Show Signs Of Working

Last week, Stellantis reported a sharp 70% drop in profits for 2024. The company’s earnings fell to €5.5 billion ($5.7 billion), with sales revenue down 17%. Much of this decline is attributed to falling demand in the U.S. market, where higher vehicle prices pushed potential buyers away.

In response, Stellantis launched a major strategy overhaul last year, cutting prices across its U.S. lineup in an effort to win back customers and reduce a massive inventory surplus. According to data from CoPilot, an AI-driven market analysis tool, those price cuts seem to be having the desired effect.

CoPilot tracks dealership pricing and inventory across the U.S. and reports that the average price of a Ram truck has dropped by 9% over the past year, landing at $60,352. More importantly, the market days supply (MDS) for Ram vehicles—measuring how long cars sit on dealer lots—has fallen 23% to 106 days.

Jeep® vehicles have seen an even steeper price drop of 12%, with average prices now at $47,691 and MDS falling 18% to 111 days. Chrysler models have experienced a 5% price reduction, with an average price of $44,932 and a dramatic 47% drop in MDS to just 94 days.

These numbers suggest Stellantis’s pricing strategy is working to ease its inventory backlog. In January alone, the automaker reported a reduction of 100,000 vehicles from its U.S. inventory. CoPilot CEO Pat Ryan told Fortune, “They’ve had big sales in January and particularly February, which is starting to clear out the inventory overhang. It’s getting them down to a healthier inventory level.”

Stellantis’s pricing shift follows criticism of its earlier strategy under former CEO Carlos Tavares. In a premiumization effort, Tavares pushed vehicle prices higher, which dealers and customers resisted, leading to falling sales and rising inventory.

While the current price cuts are helping to move cars off lots, questions remain about their long-term sustainability. “The problem is going to be, are these new prices—which appear to have found a market—sustainable?” Ryan asked. “It’s one thing to clear out excess inventory; it’s another to say: ‘Can you be a profitable dealer with a sufficient return at those prices?’”

As Stellantis continues its efforts to stabilize its U.S. operations, the balance between competitive pricing and profitability will be crucial.

Source: Fortune