Carlos Tavares Resigns: A Long Read

AROC |

2 December 2024 |

Industry News

The resignation of Carlos Tavares, CEO of Stellantis, marks the end of a transformative yet turbulent era for the brand that owns Alfa Romeo, Maserati, Jeep, Peugeot, Citroën and Fiat.

Stellantis was born from the merger of Fiat Chrysler Automobiles (FCA) and PSA Group in January 2021, a bold move aimed at creating a global powerhouse in the automotive industry. Under Tavares, Stellantis initially achieved remarkable success, with record profits in 2023.

However, the past year has revealed cracks in its foundation, as global economic headwinds, internal challenges, and strategic missteps culminated in Tavares’s departure.

A Promising Start

Carlos Tavares, known for his strategic prowess, was a key architect of Stellantis creation. The merger was envisioned as a way to leverage scale, optimise resources, and invest heavily in future technologies such as electrification and autonomous driving. Tavares implemented a cost-cutting ethos, consolidating operations and trimming redundancies to maximize efficiency.

By 2023, Stellantis had emerged as one of the most profitable automotive companies in the world.

The group posted record net revenues of €189.5 billion and net profits of €18.6 billion, largely driven by strong sales in North America and a well-received portfolio of Jeep, Ram, and Peugeot models. The electrification strategy gained momentum with the launch of competitive EVs such as the Jeep Avenger and Peugeot e-208.

2023 – the Golden Year

2023 was the high watermark for Stellantis, a moment when the company seemed to be firing on all cylinders.

Under Carlos Tavares’s leadership, the group delivered exceptional financial results, achieving net revenues of €189.5 billion and net profits of €18.6 billion. This success was fuelled not only by the high-margin Jeep and Ram brands but also by a revitalised strategy across Stellantis diverse portfolio of marques.

One of the standout achievements in 2023 was Stellantis’s ability to breathe new life into several of its iconic yet previously struggling brands. Tavares focused on leveraging the unique identities of these brands while optimizing shared platforms and technologies to reduce costs.

Alfa Romeo experienced a renaissance in 2023, building on the success of its premium SUVs, the Stelvio and the Tonale. The Tonale Plug-in Hybrid, introduced in late 2022, became a strong seller in Europe, attracting a younger, eco-conscious audience while maintaining Alfa’s signature sporty appeal.

Alfa Romeo also unveiled a new sports car concept, hinting at its return to performance-centric models, which generated significant buzz and reaffirmed its status as a driver-focused brand.

Fiat capitalized on the growing demand for small, urban-friendly EVs with the launch of the new Fiat 500e in key European and North American markets. The model was lauded for its chic design, affordability, and impressive range, becoming one of Europe’s top-selling electric vehicles.

The brand also announced the return of the Panda in a modern electric avatar, targeting budget-conscious consumers in Europe and Latin America, further solidifying Fiat’s role as a leader in accessible mobility.

Once a fading star in the Stellantis constellation, Lancia saw a resurgence in 2023 with the unveiling of its “Pu+Ra Zero” design philosophy and the reveal of the all-electric Delta concept. Lancia’s revival strategy aimed at transforming the brand into a luxury EV marque, with a focus on the Italian market and selective European regions.

Citroën enjoyed strong sales in 2023, especially with its affordable and quirky Ami EV, which resonated with urban and young buyers across Europe. The C5 X, a crossover blending sedan and SUV characteristics, gained traction in China and Europe, showcasing Citroën’s innovative approach to modern mobility. The brand’s focus on comfort and affordability helped it carve a niche in emerging markets, particularly India, where the Citroën C3 performed well.

Peugeot continued to shine as a cornerstone of Stellantis’s European operations, with models like the 208 and 3008 leading their segments. The e-208 was the best-selling EV in Europe for several months in 2023, highlighting Peugeot’s ability to combine style, performance, and affordability.

Strategic Electrification

2023 also marked a significant acceleration in Stellantis’s electrification strategy. The group’s global EV sales grew by over 40% year-on-year, supported by an expanding lineup of fully electric and plug-in hybrid models. Stellantis’s EV platforms—STLA Small, Medium, and Large—provided scalability and flexibility, allowing multiple brands to share technology while maintaining distinct identities.

The Jeep Avenger, Stellantis first fully electric Jeep, was a highlight of the year, earning the European Car of the Year award. Similarly, the Ram 1500 REV, an all-electric version of the iconic truck, generated substantial pre-orders in North America, setting the stage for Stellantis to compete in the growing electric pickup market.

Another key driver of Stellantis success in 2023 was its increasing focus on software and connectivity. The group introduced “STLA Brain,” an integrated software architecture that enhanced vehicle performance, over-the-air updates, and customer engagement. Subscription-based features, such as advanced driver-assistance systems (ADAS) and infotainment upgrades, began generating new revenue streams.

Global Market Expansion

Geographically, Stellantis capitalized on strong demand in its core markets:

• North America: Jeep and Ram continued to dominate the high-margin SUV and truck segments. The introduction of the Wagoneer and Grand Wagoneer L models, offering luxurious features and hybrid powertrains, was particularly well-received.
• Europe: Stellantis maintained its position as the second-largest automaker in the region, with Fiat, Peugeot, and Citroën leading sales. Electric and hybrid models accounted for nearly 20% of Stellantis’s European deliveries.
• South America: Fiat was a standout performer, maintaining its position as the top-selling brand in Brazil and Argentina with models like the Fiat Strada and Toro.
• Middle East and Africa: The group saw growing demand for rugged vehicles, such as the Jeep Wrangler, and affordable small cars from Fiat and Citroën.

Stellantis received numerous accolades in 2023, further cementing its reputation. Its brands won multiple industry awards for design, innovation, and sustainability. The company’s aggressive pursuit of sustainability goals earned it high marks from environmental watchdogs, bolstering its corporate image.

Stellantis success in 2023 was underpinned by its ability to generate significant cash flows. Cost synergies from the FCA-PSA merger exceeded expectations, reaching over €7 billion, well ahead of the €5 billion target set during the merger. This financial discipline enabled Stellantis to fund its ambitious investment in electrification and software development while returning value to shareholders.

2023 was a showcase of what Stellantis could achieve as a cohesive entity.

However, the very factors that propelled its success—strong North American sales, electrification, and cost synergies—were also areas where cracks began to emerge in 2024, setting the stage for the challenges that ultimately led to Tavares’s resignation.

2024: A Dramatic Downturn

As 2024 unfolded, Stellantis encountered multiple challenges that unraveled its momentum.

A significant issue was the decline in vehicle sales, particularly in North America. Stellantis struggled with overstocked inventories for Jeep and Ram models, as rising interest rates and inflation deterred consumers from purchasing new vehicles. The company had over 3 million units sitting in dealer lots by mid-2024, leading to reduced production capacity and layoffs at key plants.

China, the world’s largest automotive market, remained a persistent Achilles’ heel for Stellantis. Despite efforts to establish joint ventures and introduce region-specific models, Stellantis failed to gain traction against local automakers and established Western rivals. By mid-2024, its market share in China was a mere 0.5%, raising questions about its ability to compete in a rapidly evolving landscape dominated by Chinese EV manufacturers.

Labour unrest further exacerbated Stellantis woes. Workers in the U.S., Europe, and Canada staged strikes demanding better wages and improved working conditions, citing record profits in 2023 as justification for their demands. Production halts and increased labour costs strained profitability and disrupted supply chains.

While Stellantis initially made strides in electrification, it struggled to keep pace with EV market leaders like Tesla and BYD. Delays in launching new electric models and skepticism about the affordability of its EV transition plan created uncertainty among investors. Furthermore, rising costs of raw materials for batteries and a slow build-out of charging infrastructure in key markets hindered adoption.

The global economic environment also turned against Stellantis. Higher interest rates, inflation, and volatile energy prices dampened consumer spending on vehicles. Emerging markets, where Stellantis hoped to expand, faced currency depreciation and political instability, further eroding potential gains.

Leadership Under Fire

Internally, Tavares faced criticism for his management style, particularly for pushing aggressive cost-cutting measures at the expense of long-term growth. The integration of FCA and PSA, while operationally successful, left cultural and organizational tensions unresolved. Reports surfaced of disagreements between Tavares and key executives over how to address declining performance and adapt to market shifts.

The profit warning issued in September 2024 marked a turning point. Stellantis slashed its operating margin forecast from double digits to a range of 5.5% to 7%, sending shockwaves through the industry. Shareholder confidence eroded, with Stellantis’s stock price plummeting by nearly 30% over the course of the year.

The Final Act: Tavares’s Resignation

The culmination of these issues led to Tavares’s resignation in December 2024. Though what is reported as his resignation was almost certainly the result of an instruction to leave immediately from John Elkann, the head of the Agnelli family and the largest shareholder of Stellantis.

His abrupt departure underscores the urgency for Stellantis to redefine its strategy and rebuild trust with stakeholders. Chairman John Elkann has stepped in to lead an interim executive committee tasked with stabilizing the company and finding a new CEO by mid-2025.

The resignation of Carlos Tavares marks a pivotal moment for Stellantis. While his tenure brought record-breaking success, it also revealed vulnerabilities that now threaten the automaker’s long-term viability. The next phase of the Stellantis journey will require bold decisions and a renewed focus on innovation, collaboration, and market adaptation to reclaim its position as a leader in the global automotive industry.

What Lies Ahead for Stellantis?

Stellantis future hinges on its ability to address several critical challenges:

• Reviving Sales: The company must realign its product portfolio and pricing strategies to better match consumer preferences and economic conditions.
• China Strategy: A focused and realistic approach to China is imperative to capture meaningful market share in the EV segment.
• Labour Relations: Building trust and collaboration with its workforce will be essential to ensure operational stability.
• Electrification Goals: Accelerating EV rollouts and investing in battery technology are vital to compete in an electrified future.
• Leadership Transition: Finding a visionary leader who can unify Stellantis diverse operations and navigate global complexities will be crucial.

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