Carmaker Stellantis has its eyes on India, as chief executive Carlos Tavares signals the market should be more profitable and a bigger growth opportunity than previously expected.
Tavares said he expects revenues in the South Asian nation to more than double by 2030. He also expects operating profit margins to be in double digits within the next couple of years.
Tavares’ bullishness on India – where Stellantis sells its Jeep and Citroen brands – is tempered by challenges in countries such as China and Russia.
The world’s fourth-largest carmaker is facing headwinds in China, where it is reshuffling its strategy amid lagging sales and strong competition, and in Russia, where it has suspended production due to the Ukraine war.
“The challenges … are giving India a bigger opportunity, even bigger than in the past,” Tavares said.
‘Do it the India Way’
Western carmakers for years have struggled to make money in India, a market dominated by Asia’s Suzuki Motor and Hyundai Motor with their small, low-cost cars.
But Tavares said: “Being profitable in India is possible if you do things the India way.”
This, he said, includes sourcing parts locally and vertically integrating the supply chain to keep costs low, and engineering cars locally with features Indian consumers want and are willing to pay for.
Stellantis, formed in 2021 through the merger of France’s PSA with Fiat Chrysler (FCA), in March outlined a new group strategy to boost revenues and keep profit margins high as it steps up efforts to roll out electric vehicles (EVs).
At the heart of its India plan is Stellantis’ smart car platform programme, which it has developed in the country to allow it to launch small, petrol-powered cars of less than four metres in length, Tavares said.
Locally Sourced Contents
Small cars are taxed at lower rates, making them more affordable. It will also launch electric versions of its small cars starting next year, he said.
Stellantis manufactures its powertrains and gearboxes locally and sources more than 90% of the vehicle’s contents in India.
Its engine plant in southern India is a global benchmark on cost and quality and it plans to do the same at its two car plants, where it manufactures Jeep SUVs and Citroen cars, Tavares said.
“We have been working for many years now on localisation, vertical integration in India, to enjoy the smart frugality of India,” he said.
Stellantis has invested over 1 billion euros ($1.05 billion) in its Indian operations since 2015. The carmaker also wants to source cells and batteries from India whenever the supply chain develops, Tavares said.
Long-Term Strategic Plan
Matthias Heck, a senior credit officer at Moody’s in Frankfurt, said Stellantis had shown a “strong operating and financial performance in 2021 and the track record management has built over the last years in lifting the group’s performance”.
In its long-term strategic plan announced in March, Stellantis said it would achieve sustained double-digit company-adjusted operating income margins through the decade.
Tavares said it would meet its 5-billion-euro merger synergy target by the end of 2024, whilst doubling net revenues to 300 billion euros by 2030.
The company targets global battery electric vehicle (BEV) sales of 5 million units in 2030, reaching 100% of passenger car BEV sales mix in Europe and 50% passenger cars and light-duty trucks in the US in 2030.
- Reuters, with additional editing by George Russell