Stellantis N.V. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Leadership Team: New leadership team appointed, composed of proven performers focused on driving business acceleration.
• Actions in H1: Ended fuel cell initiatives in Europe due to lack of profitability prospects, stopped poorly suited product initiatives, and launched new products like the Ram 1500 Express.
• Inventory and Order Books: Decreased total inventory by 16% in Europe and North America combined; North America and Europe combined order books increased 14% over the last year and 34% in the last 6 months.
• Regional Performance:
  • North America: Leaner inventories, healthier order book (90% year-over-year improvement), Ram retail sales up 25% in H1.
  • Enlarged Europe: Market share at 17% (up 1.3 percentage points from H2 2024), second in European BEV volumes, and #1 in European hybrids.
• Profitability Actions: Return of SRT division for North American brands, model year '26 products in North America with margin accretive trim lineups, and ramp-up of Smart Car products in Europe for higher volumes and profits.

Segment Performance

• North America: Performance impacted by tariffs, lower fleet performance, and improved inventory discipline.
• Europe: Resulted from 13% lower industry volumes in LCVs, product transition gaps, and a roughly EUR 500 million provision for a 1.5-liter diesel engine campaign.
• South America: Continued market share leadership with industry growth in Brazil and Argentina.
• Middle East and Africa: Experienced FX headwinds to AOI due to Turkish lira decline (~EUR 600 million), but maintained share leadership in Turkey and ramped local production in Algeria.

Guidance

• Second half net revenues expected to increase sequentially.
• AOI margin expected to be in the low single digits.
• Industrial free cash flow expected to improve compared to the first half of 2025.
• Tariff expense expected to be at the upper end of the previously provided range (~EUR 1.5 billion).

Risks

• Tariffs: Significant headwind, with ~EUR 1.2 billion to ~EUR 1.3 billion of the expected EUR 1.5 billion tariff expense likely in the second half.
• Foreign Exchange: Headwinds to AOI due to currency fluctuations (e.g., Turkish lira decline).
• Production Disruptions: Impact on working capital and industrial free cash flow.
• Market Share Deterioration: Caused by phased-out nameplates in North America and Europe, requiring product restoration and reinvigoration.

Question and Answer

Q: Focus on U.S. market profitability levers excluding growth levers.

A: Antonio Filosa mentioned actions like leveraging the Big Beautiful Bill for better margin-optimized mix, launching model year '26 products from a healthier inventory, and pursuing total production cost reduction.

Q: Concerns about cash flow, balance sheet, and cash returns to shareholders.

A: Douglas R. Ostermann stated cash burn rate is reducing, expecting significant decrease in second half, and emphasized growing Finco with inflows from Europe and outflows managed, with net outflow < EUR 0.5 billion.

Q: Thoughts on brand portfolio streamlining and Capital Markets Day.

A: Antonio Filosa mentioned working intensively on brand portfolio management, with details to be provided at the Capital Markets Day in early 2026.

Q: Europe's pricing and market share outlook.

A: Antonio Filosa noted Europe is turning the corner with growing market share from new product launches, ramping Smart Car products, and expecting H2 improvement despite industry challenges.

Q: Diagnosis of market share deterioration and radical actions.

A: Antonio Filosa cited phased-out nameplates in North America (e.g., Jeep Cherokee, Dodge Charger) as a root cause, with restoration of lineups and multi-energy offers as solutions.

Q: Relationship with U.S. dealers and confidence metrics.

A: Antonio Filosa mentioned improved dialogue with dealers, with order book growing >90% year-over-year as a sign of restored confidence.

Q: Guidance on free cash flow and working capital.

A: Douglas R. Ostermann noted tough period to forecast, with significant external headwinds, but expected working capital to improve with increased volumes in second half.

Q: Tariffs and Mexico's impact on Cherokee.

A: Antonio Filosa discussed constructive dialogue on tariffs, emphasizing U.S. content in vehicles, and working on cost reduction for the Cherokee built in Mexico to offset tariff effects.