Growing online sales, the electrification of the range and the merger of the Peugeot and Fiat groups explain the drastic intervention by Stellantis, which is cancelling all contracts with its European dealers.
Stellantis, the merged group of FCA (Fiat, Alfa Romeo, Chrysler and Jeep) and PSA (Peugeot, Opel, Citroën and DS), is cancelling all contracts with its dealers in Europe. For example, in Belgium alone, this concerns some 80 dealerships with a multitude of branches. As a result, a lot of garages and sales rooms in Europe will disappear in the coming years. The decision can be explained by a number of causes.
First of all, there is a rationalisation of the dealer network. Stellantis is the result of the huge merger between the car giants PSA and FCA. It was announced in 2020 and became a reality in January. With the merger of the two companies, there is a lot of overlap in the models of the brands. So it was already expected that the merger would lead to a major clean-up among their shared dealers.
Furthermore, as mentioned in our previous blog posts, all dealers are struggling with the rapid electrification of the brands’ offerings. Electric cars require significantly less maintenance, and maintenance happens to be a very important source of profit for dealers.
After the initial lockdown, which almost all companies decided to impose, the later part of 2020 proved to be much more promising. The sales numbers during the fall of 2020 were even betitier than the same period of 2019. The production was back to an average level, and the process was again safe with necessary health regulations. However, the cars produced in that period were assembled with the parts and components delivered before the pandemic started, which meant that car companies would soon run out of semiconductor chips. That happened in 2021, puting the car companies in a very awkward and problematic situation. The demand for new vehicles is enormous, but car companies simply cannot produce any vehicles due to chip shortages.
In many European countries Stellantis is as big as the Volkswagen Group (VW, Audi, Skoda, Seat and Porsche). Of every ten new cars sold, two are part of one of the Stellantis brands.
The car dealers will lose their right to sell the Stellantis brands on 1 June 2023. By then, a new dealer network must be ready, which is likely to be much smaller than it is today. We will see dealerships emerge that sell all 14 brands of the group, most likely under one roof. The large sellers of Stellantis brands can look forward to the European restructuring with confidence, however they fear that the smaller dealers in particular will suffer.
Even a few years before the merger between PSA and FCA, the two companies were already undergoing heavy restructuring. In 2017, PSA halved the number of Citroën and Peugeot sales outlets. A year later, PSA cut its Opel dealerships: 34 out of 54 remained.
The restructuring has not made the dealers any healthier. The latest profitability study by mobility organisation Traxio shows that Peugeot dealers posted an average net profit margin of 0.7 % in 2019. Citroën, too, at 1.37 %, is still doing worse than most other brand dealers. Fiat is slightly above that.
Every player in the automotive industry, such as buyers, sellers and manufacturers, can disrupt the market. This can have a significant impact on car manufacturers.
To be able to withstand this volatility, it is important to find a reliable partner who can act strategically and agile to such events.