One of the greatest pieces of investing advice of all time, from Warren Buffett, is to be fearful when others are greedy, and greedy when others are fearful. It seems that the automaker Stellantis (STLA +6.01%) has truly taken that to heart.
At a time when electric vehicle (EV) growth in the U.S. has slowed compared to expectations, and many major automakers are making significant reductions to their EV strategy, Stellantis is charging ahead.
Pumping the brakes
With EV growth failing to reach the heights many automakers expected, it has caused many to adjust their strategies. The reason is simple: Losses are significant. Take Ford Motor Company (F +3.54%) for instance, which stands to lose up to an estimated $5.5 billion on its Model e division in 2024 alone.
Ford isn't waiting to take action: The company announced late in 2023 that it would delay roughly $12 billion in EV spending to help offset significant losses. More recently, Ford announced plans to pivot from building EVs at its Canadian plant to gasoline-powered heavy-duty F-Series trucks. The latter are highly profitable, and management says it can't build enough of them.
But wait, there's more. Ford is also delaying production of its next-generation EV pickup and canceling plans for a three-row electric SUV. All in all, Ford's share of its annual capital spending aimed at pure EVs will go from about 40% to 30%.
That's a good example of how one automaker is pumping the brakes on EV investment, while Stellantis is being more aggressive.
Charging forward
Stellantis already is a leader in plug-in hybrid sales thanks to its variants of the Grand Cherokee and Jeep Wrangler, and now it appears ready to push further into full-electric vehicles.
The automaker's Fiat 500e and Ram ProMaster EVs went on sale in 2024. Next up on the list to hit the roads is the Jeep Wagoneer S and Recon, the Ram 1500 REV, and the Dodge Charger Daytona.
In terms of brands, Alfa Romeo and Chrysler are hoping to go all-electric by 2027 and 2028, respectively.
In fairness, investors can question which strategy is the correct path forward. Just because Stellantis is charging ahead doesn't mean consumers will follow. In fact, the company announced just last week that it would suspend production of the fully electric Fiat 500 for four weeks due to weak demand.
The company's plans are ambitious, and the challenge is even more difficult when you consider the price points of EVs. Stellantis CEO Carlos Tavares told Automotive News, "If we want to protect the jobs in the U.S. and the manufacturing footprint in the U.S., we need to find the conditions to make a $25,000 [battery electric vehicle] in the U.S. that we can sell at significant volumes with reasonable margins for that proposal to the market to be sustainable."
NYSE: STLA
Key Data Points
To the point
For investors, this is the crucial takeaway. If you're investing in automakers currently, decide how you feel about EVs and invest accordingly -- but remember EVs are here for the long term.
If you're bearish, a strategy similar to Ford's is better for your investing thesis. If you're bullish on a smart long-term play, a strategy similar to Stellantis' might be wise.
The best-performing major automakers will be the companies that find equilibrium between sales of EVs and those of internal-combustion vehicles -- which is far easier said than done, as comparing these two iconic automakers shows. But in this race, they're all likely to get to the same finish line.
