Stellantis Adapts to EV Challenge, Follows Tesla's Lead by Cutting Costs Through Global Job Shifts

Stellantis NV STLA is shifting its engineering recruitment toward lower-cost countries such as Morocco, India, and Brazil, responding to the challenges posed by cheaper Chinese electric vehicles and diminished demand. 

The company, known for producing Jeep SUVs, Opel Corsas, and Chrysler minivans, now targets hiring where the annual cost per engineer is roughly 50,000 euros (roughly $53,400) or less, a fraction of the cost in places like Paris and Detroit.

The company’s CEO, Carlos Tavares, faces criticism for his high compensation amid widespread job reductions and worsening working conditions for the remaining staff, Bloomberg reports.

Also Read: Stellantis CEO Warns Of Challenging Year Amid Rising Prices: Report

Facing declining electric vehicle (EV) demand, Western automakers, including Tesla Inc TSLA and Volkswagen AG, are cutting jobs and relocating production to more affordable locations. 

Stellantis aims to locate about two-thirds of its engineering workforce in these cost-effective regions over time.

The strategy includes significant personnel adjustments. For instance, Stellantis plans to add 500 engineers to its nearly 4,000-strong team in Brazil and is hiring electronics engineers in Mexico. 

In the U.S., Stellantis has recently cut about 400 engineering positions at its headquarters in Michigan, which has led to problems with production launches, according to local union leaders. 

These changes are part of broader cost-reduction efforts, including planned job cuts in Italy.

In April, Stellantis reported a 12% decrease in net revenues to $44.6 billion for the first quarter, lagging the analyst consensus estimate of $45.6 billion. 

Consolidated shipments plunged 10% to 1,335 thousand units. Stellantis shared plans to launch 25 new models in 2024, four of which it introduced in the first quarter.

Analysts consider Stellantis to be the benchmark for established OEMs, noting its position in the market. Despite potential margin pressures from an increasing mix of electric vehicles (EVs), Stellantis stands out for its annual sales volume of over 6 million units and best-in-class margins, indicating a substantial buffer in profitability. 

Stellantis’s global reach, particularly in regions slower to adopt EVs, offers a partial buffer against the risks associated with the shift toward electric vehicles.

Stellantis stock gained 38% in the last 12 months. Investors can gain exposure to the stock via First Trust BuyWrite Income ETF FTHI and SPDR S&P Kensho New Economies Composite ETF KOMP.

Price Action: STLA shares are trading lower by 4.27% at $21.52 in premarket at the last check Thursday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Stellantis Photo by Jonathan Weiss on Shutterstock