Stellantis N.V.

Hello and welcome to the Stellantis full year 2022 results. I will now hand over to our host, Ed Dittmeier, Head of Investor Relations, to begin today's conference. Thank you.

Hello, everyone. Joining us today as we review Stellantis' full year 2022 results. Earlier today, the presentation material for this call, as well as the related press releases, were posted under the investor relations section of the Stellantis Group website. Today, our call is hosted by Carlos Tavares, the company's chief executive officer, and Richard Palmer, the company's chief financial officer. After both Mr. Tavares and Mr. Palmer present, they will be available to answer questions. Before we begin, I want to point out that any forward-looking statements that we might make during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement included on page two of today's presentation. As customary, the call will be governed by that language. Now, I would like to hand the call over to Carlos Tavares, CEO of Stellantis.

Thank you, Ed, and welcome to all of you. We really value your time and I would like to thank you for your interest in Stellantis. Let's get started. It's an understatement to say that 2022 has been a challenging year. It has been a year where we saw rising geopolitical tensions, regulatory chaos, supply chain disruptions, strong inflation, and despite all of those headwinds, our company has demonstrated once again that we are resilient, that we are an all-weather company, and that we deliver results. This is a very high-level summary of 2022. I would like to express to each and every of the Stellantis employees my sincere and very warm consideration, my deep thanks for what they have done for the company. They have demonstrated that they are a great team. They are resilient. They are focused. They have a great business sense. And here we are to celebrate today the results they have achieved. I would like also to express my sincere appreciation to our union partners. They have been highly mature, having a perfect understanding of what's going on in the world, understanding that the challenges that are in front of the company right now are external challenges. And because those challenges are external, it's best to align internally to get things done and to execute our strategic plan. So I would like also to express to our union partners my sincere appreciation. Last but not least, the Stellantis board has demonstrated a very strong support to the management and to the employees, always with demanding questions, yet helping the company to move forward. We are in the second year of Stellantis. So it's important that the board is fully supporting what we are doing. It is perfectly the case. And I would like to thank the board for their trust and for the autonomy and support that they have given us. So from here, I think we can summarize many of the things we are going to explain to you with Richard Palmer today by telling you that our net revenues were up 18%. Our adjusted operating income was up 29%. Our AOI margin was at a record high with 13%. Our net profit up 26%. Our industrial free cash flow up 78%. And our BEV sales growth rate up at 41%. It's important that we state those simple numbers so that we understand that we are not talking about transformation at Stellantis. We are doing it. We are now in the course of executing the transformation of the company. And the results we are achieving today for the second year of Stellantis are an encouragement. to accelerate and to go even deeper and faster in the transformation of the company. And again, I would like to express to every and each of our employees my sincere appreciation. They have been doing a stellar job in this second year of our startup company. If you look at some of the other numbers, We see that we had a very strong free cash flow with more than 10 billion euros, 10.8 billion euros, so a very strong cash generation. We are on track to deliver by 2030 the 20 billion that we have committed in the plan, in the strategic plan. A very nice number about cash synergies, net cash synergies at 7.1, more than the commitment of five. that we were expected to deliver by 2024, which means that we are ahead of the plan. And it's not because the CEO or the CFO has been pushing on this, it's because it's a bottom-up, a bottom-up contribution from our employees that perfectly understand the sense and the need for this merger. So this merger is being a big success, not because of us, but because of our employees. Our employees get it. They understand that we are better together than on a standalone position. They understand that we have moved from second league car companies to first league mobility tech companies. They get it and they are supporting the move, which is of course very reassuring for the future. We continue to execute our Therefore 2030. Just taking an example of electrification, we have currently 23 electric vehicles on sale. By the end of this year, we'll have 32, nine more. And by the end of next year, 24, we will double what we have today, as we'll be at 47 pure BEVs by the end of this year. It's also important that you realise that the 41 sales BEV growth rate has been achieved only with European sales, which means that we didn't even start the BEV offensive in the US market, but we are going to start this year. From this year in 2023, we introduced the RAM ProMaster EV in the US market. So from this year, we start the EV offensive in the US market, and we achieved 41% sales growth in 2022. mostly on the basis of the European sales. It is also important to recognize that we are by far the leaders of the LCV market in Europe, and that in Europe, in the LCV BEV market, we have 42.7%. of market share in the LCV BV market. So you see what this demonstrates is that the technology of Stellantis in terms of electrification is very much appreciated by the consumers. We were blessed with the fact that the first product that has been launched in the Stellantis era, the Jeep Avenger, the first ever pure Jeep EV has been awarded Car of the Year, which is a very strong recognition of our capability. And therefore, it gives the team another encouragement to move fast and strong in this transformation. If you go now to North America and have a look at the regions, you can see that North America achieved a record margin on the full year at 16.4% AUI margin, a very impressive result in conditions which were not always easy. namely in terms of supply, but the team was able to manage the business model in a very skilled way. We lost a few tenths of market share as a consequence of supply disruptions. That is something that we recognize we can do better in terms of supply. We are keeping a very high average transaction price, the highest among the big three in the US market, which means that the pricing power of our models is matching the appeal of what we create. And our creative teams, both from design and engineering, are doing a stellar job to make sure that the customers are willing to pay for the value that we create. And this is measured on the average transactional price, which is the best in the market. We are the number one US PHEV sales company. We are number one in the PHEV with the Wrangler 4xE in US and Canada. And of course, we are benefiting with the RRE from a framework that is going to support our US sales. So record profitability in North America, growing PHEV sales and just introducing the BEV right now in 2023. So more to come. and more potential for profitable sales in this market. If we move to Europe, Europe was also able to deliver a record AUI margin at 9.9, a significant improvement against last year, 80 basis points. We are the number two in BEV sales in the European market. Number two, being number one in France with the Peugeot E208 and number one in Italy with the Fiat New 500. So again, our pure EV cars are appreciated and the technology is demonstrating a great deal of maturity. Our market share in LEV is at 15.7. In pure BEV, our market share is at 16.2. And we were, to a certain extent, hurt by an outbound logistics problem that has been somewhere reducing our market share in Europe. And this is one of the operational issues that we are now fixing. It's an opportunity to do better in 2023. I believe that in the next couple of months, this will be behind us. It has been painful. We have understood where the outbound logistic issues were. We are addressing them. They are multiple. It's not one single reason, but we are addressing each of them with a specific action plan. And we are still around 20% market share, even though we lost 240 basis points in 2022 on the back of this outbound logistic problem. We are now on track to execute our new retailer distribution model. We have been having a very fruitful dialogue with our dealer network associations. They have understood what is at stake in terms of improving the customer centricity of our distribution, in terms of making sure that we can keep both of our business models profitable for the future as we are aligning the distributors and ourselves on one single thing, which is to make the customer happy. We have also delivered on what we committed to you by being now live on the electric motor production in our Tremry plant in France. And we are going to be live in the H1 2023 on the electric transmissions. And I would add to this that on the second half of 2023, we will be producing battery cells in our first European gigafactory. So in 2023, our first gigafactory in Europe in Douvrain will be operating on the D-samples to validate the production and then go full production by the beginning of next year. So Enlarge Europe is on track to deliver its electrification plan. Enlarge Europe is highly profitable, doing a great job in terms of BEV sales. There is potential to do better. There is potential to go faster once we solve our outbound logistic issues, and we will. And our manufacturing footprint is now ready, not only to manufacture the electric components like the motors and the transmissions, but very soon to manufacture the battery cells. It's also important that you realize that our BEV sales growth in Europe is among the best if not the best of the industry, including against people that you generally consider as being the leaders on this matter. If I now move to the rest of the world and comment three other areas of our business, we can see that Middle East and Africa is now the most profitable region of our business at 16.7. We nearly doubled our profit against 21. which demonstrates that there is a significant profitable growth potential in Middle East and Africa. And we have been making many, many decisions to improve the sourcing in Africa for Africa and Middle East. And the goal is very clear. We will move from 30% local sourcing to 70% local sourcing within the course of this plan. And you have been looking at some of our decisions. If you pile up all of those sourcing decisions and more to come, you'll see that we are going to put ourselves in a trend where, by the end of this plan, we'll be sourcing for the region more than 70% of the needs, which means that we are going to serve on the high growth potential of this region, given the very good birth rate and the young population that we have over there. The market share in Middle East and Africa improved by 20 basis points to 12%. More to come. South America has been a success story for our company. We are by far the automotive leader in the region and the Fiat is the leading brand. So we are keeping that leadership strong and we will continue to reinforce that leadership. As you see, the profit increased by 132% to now more than 2 billion euros. It's significant because if I sum up those three regions here, we can tell you that we call this the third engine. As you know very well, ex-PSA was very much dependent on Europe, ex-FCA very much dependent on the US. Stellantis has two engines, North America and Europe. And we are adding a third engine to make sure that our business footprint is highly diverse. And what we are saying is that we are already contributing at 3.8 billion euros, which is already a significant number. But within the next three years, what we call the third engine, which is the combination of these three regions, will be at the same level as Europe. Which means within three years, our company will have three engines, North America, Europe, and overseas, as we call the combination of these three regions. So in all of these cases, you see that we are growing in profit. It's also the case for China and Asia-Pacific. Profit has been improving from 11% AOI margin to 14.5%. And the amount of profit, interesting to see that it has increased by 48%, which means the amount of profit adjusted operating income increase rate in Asia has been higher than what we have for the whole company. The whole company is at 29%. And China and Asia Pacific are at 48% of AOI increase. We are now successfully introducing our national sales company for CBU sales and the JEEP direct online sales in the Chinese market. It's working very well. It's contributing to the increase of the profitability in China. And even more important, we are now, as we speak, manufacturing the first new Citroën C3 EV version based on the smart car platform, which is going to give us a fantastic tool to be competitive against new entrants in the material markets, i.e. the Chinese entrants in the material market. So we have the tool with the smart car platform-based family and with the EV technology that we have on that platform, We have now the tool to be able to fight on the middle of the market, if not the low end of the market, in terms of profitability and cost competitiveness vis-à-vis the new entrants. If we move from here to the brands, let's start with Jeep, our global SUV brand. Jeep doing a fantastic job. The first ever pure EV, the Jeep Avenger, as I said, was awarded European Car of the Year 2023, which demonstrates that the teams did not waste any time to bring the EV technology to Jeep in the European market. We are now starting the sales of this product very soon. We will bring also in 2024 the all-electric Recon from Jeep and the Wagoneer S, a compact Wagoneer, pure EVs that will reinforce our position, namely in the US market. We have successfully launched the Grand Cherokee 4xe and it's now ramping up on the segment share quite nicely. And we keep on expanding the sales of this icon. As you can see, we are also now expanding the sales of Wagoneer and Grand Wagoneer around the world. Very profitable product, very high end product for this brand. And of course, Middle East and Africa represent a big opportunity that we are going to grasp in 2023. Jeep has also been the number one SUV brand in South America six years in a row, which means that the roots of Jeep in Latin America are getting deeper and deeper. And we have to recognize the great job that has been done by this brand. The uniqueness of Jeep is the very sharp and very clear positioning of the brand all over the world, which captures the emotions of many of our customers who are looking for freedom and outdoor living. And the positioning of Jeep is so sharp, so unique around the world, that it captures the mind and the emotions of many of our customers. Our pricing is just fine. If we move now to the other American brands, it's good to say that the Pacifica is still the number one selling minivan in North America, and sales are up by 11%. Pricing power is fine. And progressively, as we did at the last CES in Las Vegas, we are showing the way of what the Chrysler rebound will be in the near future. And I think that the potential to relaunch the Chrysler brand is getting bigger and bigger by the day. When you look at RAM, we have the all-time highest US average transaction price. That's great. It means that our customers are recognizing the value that we create with the Ram pickup trucks. Pricing power is fine. As I said, the Promaster BEV is going to be launched this year in H1. And we'll start delivering those BEV vans in H2. But more importantly, you have seen at the CES in January, the brand new 1500 BEV pickup truck from Ram. You have seen the appeal. You have seen the fantastic creativity that our teams have demonstrated through the different functionalities. And you can also trust that our performance index against our competitors in terms of combining, towing, payload, Speed of charging and range, using those four performance KPIs, I can assure you that we are going to have the most competitive BEV pickup truck in the US market. So more to come. Stay tuned. This is going to be big news very soon. I can also tell you that when we opened the pre-orders for the next BEV 1500 Ram pickup truck, we were sold out in three days for the first model year. So three days to sell the whole production of the first model year of the BV pickup truck. If we go to Dodge, Dodge has been doing a fantastic job with the Challenger. We are the number one selling muscle car in the US for the second year in a row. Pricing power is stellar. And we are now introducing the all new Hornet that will start deliveries in H1 2023. So we will reinforce the business of dodge uh... in uh... in this year and i can tell you that The way we are preparing for the e-muscle car in the future is just outstanding from every different dimension I have seen. Sound, acceleration, performance, design, connectivity, features, you name it. The e-Dodge is going to be a fantastic success in this market. So those were the American brands. If you now go to the upper mainstream, mostly Opel, Vauxhall and Peugeot. It's interesting to see that Opel within the Stellantis brand portfolio is the fastest growing brand in BEV sales. So the Opel global BEV sales rate increases 52%. As you remember for a whole Stellantis, it was 41. Opel is on the leading edge of BEV sales, which is fantastic. This is what we like them to do, and they have been increasing this sales of BEVs year over year in a significant matter. It's the only brand where the total market share in the BEV market is higher than the total market share in the total market. So Opel is on the edge of electrification. The Corsair continues to be a big success, number one selling car in Germany and UK on this segment hatch. Pricing power is fine. And among the different LCV brands we have, Opel is the number one in terms of BEV sales, number one in sales growth, number one in LCV sales, which is demonstrating that within the Stellantis galaxy, Opel is the leading brand in terms of electrification. At the same time, Peugeot has demonstrated great success the number one selling car in U30 for the Peugeot 208, the number one selling car on the E208, starting with France, of course. And the pricing power is the reference of the market, growing outside of Europe. And this BEV sales momentum will continue with five new C-segment BEVs in the next two years. So now Peugeot is pushing very hard on the BEV sales, already number one with the E208, but will continue to reinforce its leading position. If we move now to the core brands with Citroën and Fiat, as I said, the big news is the launch of the new Citroën C3 based on the smart car platform. Sales are growing steadily in India and in Brazil. The launch has been successful. Very tight control of quality, which is fine. And we are ramping up nicely with those products that have the capability to fight against the newcomers. As I said in the introduction, we are now manufacturing the EV version of the C2 and C3 right now in India for India. But that is going to be an opportunity for other markets as need be. Pricing power is fine. The only concept that was launched in Europe has shown the vision for the brand. And this vision is going to translate in great new products very soon. So I can tell you that this concept car has been extremely inspiring to show us the way to be modern, clean, affordable and light in the way we bring zero-emission mobility to our customers. At the same time, Fiat has been doing a great job. Fiat brand is a market leader in Brazil, in Turkey and Italy. Strong market shares, as you can see. The Fiat 500e is the third most sold BEV in Europe. Number one in Italy, number two in Spain, number three in Germany. Could have been better had we had more supply. So we were limited by the supply, but the potential of this product is much higher than number three. Pricing power is fine. And the brand new Fiat BEVs are now coming. They will start this year in 23. And you see now the power of Stellantis at work. All the new BEVs from Fiat, as much as we have seen the Jeep Avenger, are coming. And I can tell you that given the capability of this team to sell, I can tell you there is a very bright future ahead, given the pipeline of products that we have for this brand. So very excited about what we are going to see. Let's conclude here with the commercial vehicles. We continue to be the unrivaled market leader in Europe and in South America. We are growing in Middle East and Africa with a market share of 15%. There is much more potential than that, but we are ramping up. We are, as I said, by far, the BEV market leader with 42.7% market share for the BEV sales in Europe, by far number one. Number two is very, very far away. We have achieved record RAM brand sales outside of North America, which is extremely profitable. We have taken a stake in Symbio, waiting now for the closing, which is a company that is a leader in hydrogen mobility. As you know, We are now producing the first mid-size van fuel cell powered cars, and we will bring this to a high volume plant by the beginning of next year. So we are on our way to protect our leadership in fuel cell power trains. And of course, we are going to focus on the LCVs, but it's moving and it's moving fast. If we now go to the premium brands, very, very impressive performance from the premium brands. Their profit is up. Their market share is either up or stable. And customer satisfaction and quality are up. Our premium cluster has been delivering very strong value. As I said, a fantastic turnaround in Alfa Romeo. We have now a very profitable brand just by mastering the way we go to market. Highly profitable. We are now bringing the electrified products as it should be and we will be selling only BEVs from 2027. And Tonale has proven to be a very strong success with a very tight control of quality which has improved significantly. Lancia is preparing for the launch of the new models, starting in 2024, fully electrified and full BEV from 26. Pricing power improving. Epsilon still the number one selling car in Italy in the B segment, which is demonstrating the very strong skills of the Lancia team in terms of sales and marketing. As we know, this car is 12 years old, still the number one in the segment after so many years. DS Automobile has been improving both the profitability, the share, and the customer satisfaction. 100% BV launches from 24. The LEV sales mix at 41%, which is already significant. Pricing power is fine. And we have just launched the new DS3 EV with more than 400 kilometers of WLTP range using the brand new electric motor, so-called M3, that we manufacture in the French plant of Tremeray. If we move now to our unique and iconic luxury brand, Maserati, the least we could say is that Maserati is back. We have improved significantly the profitability, up 360 basis points, now reaching 8.7% AOI margin, and more to come, of course, because we believe that Maserati needs to be pulling the company up and not lagging behind the average profitability of the company, so there is more on our plans. We see that we have been doing great in Europe, On the other regions, there are some challenges that we are right now addressing. Pricing power is fine. We are bringing back an absolute fantastic product, which is the new GT, the Gran Turismo. Not only it's an iconic car, but I can tell you, as I've been driving this car for a while, the performances are stellar. The combination of NVH, ride, handling, gear shifting, brakes, Infotainment, it's absolutely fantastic product and we are very proud of GDT as much as we are now deploying the new GRECALE all over the world and that is going to happen this year on a very profitable product and that will open the road for the Folgore Pure BEV GRECALE that will be revealed on the second half of this year. While we are doing this, The new MC20 CLO has been receiving third-party accolades, demonstrating that it's a fantastic sports car, very competitive and absolutely on the edge of the technology of this specific segment. So, ladies and gentlemen, Maserati is back. Maserati is back, doing the right things in the right way, strong focus on quality, strong focus on pricing discipline. making sure that we bring modernized, iconic products that our customers love, and we love when they're happy. Let's move now to our affiliates business. Also a lot of great things going on. In terms of financial services, we are ramping up in our U.S. financial services. We have now enrolled around 90% of our U.S. dealers. And we target to cover 80% of lease volumes by the end of Q1 2023. So our sales financial arm in the US is now growing by the day. And this is going to be very supportive of our sales and of course a strong profit contributor. The pre-owned car vehicle is a success story in 2022, of course with some good market conditions. And we are now expanding dealer online sales through Spotify to North America this year. And RME's group continues to reinforce its leadership now in Austria and Italy by some more M&A. And we have seen that now that cash is not free anymore, some good opportunities have appeared and we are grasping those opportunities. In terms of circular economy, sales are growing by 22%. The plan is now being executed with many different business models depending on the components that are used in this circular economy business. And we have been partnering with Kinomic in the business of retrofitting LCVs to electric drivetrains. Last but not least, parts and services, which is the biggest part of this affiliate business, has been growing in sales on a double-digit level, and we continue to optimize the cost in terms of distribution by taking care of the warehouses and reducing the number of warehouses, while at the same time protecting the service rate to our dealers. So a lot of good things in the affiliate business, strong contributor to our profitability. In terms of software strategy, The least we could say is that everything we have told you in July 2022 in our electrification journey is now live. We are developing the three software platforms, Stellar Brain, Stellar Smart Cockpit, Stellar Autodrive. We are doing the job. We have now 1,500 software engineers on track to have 4,500 by 2024. We have educated and trained 700 graduates from our software and data academy, which means we brought some conventional engineers to the software world with a very specific training. which content is controlled by an independent advisory board to make sure that we bring the best people to select the right topics on which we should be training our people. So this software and data academy training has demonstrated a very strong potential and we are on track to deliver the size of the software engineering capability that we need given the tech dimension of our company. We see that By the end of next year, we'll have the first physical evidence of everything we are doing here. And at the same time, we have been expanding our capabilities by grasping some opportunities like the acquisition of AI Motive, which will be a strong accelerator of our ADAS developments. This has been concluded and now AI Motive is in support of all of our software platform developments, specifically in this case on ADAS. We have also created a business unit to take care of our data business with mobility sites. And we already have 13 million cars connected in operation. That was by the end of 22, and we are on track to deliver the 34 million cars connected by the end of 2013. And as you know, this is a strong foundation for additional service-related business in the future. Needless to say that we have been signing some very strong partnerships with the companies you see on this slide, Amazon, Foxconn, and Qualcomm. We are delighted to work with these very expert partners. I think we are doing a good job in creating value together. We see that Stellar Brain is going to be a breakthrough in terms of performance and cost competitiveness by reducing the number of ECUs per vehicle by more than 50%. We see that the net revenues of the software business is growing by 25% in 2022 against 2021, on track for the 20 billion that we have committed to you by 2030. So all of this is moving. So far, you don't see yet the physical evidence, but it will come very soon. I just want to be transparent with you and show you that we are doing what we told you we were going to deliver. If we look at the full electrification ecosystem, it's a rewarding slide. a little bit busy, but quite rewarding. And not only we are growing our BEV sales by 41%, which I think in the automotive industry is a very nice number, if not the best. We are currently selling 23 pure BEV models. By the end of this year, 23 will be at 32. By the end of next year, we'll be doubling against 22 at 47 models BV. What does it mean? It means that the execution capability of Stellantis in delivering the ramp up of the BV models that we bring to the market, and we told you 75 plus models by 2030, just means that we are perfectly on track. As you imagine, 47 in 2024, is absolutely the right number to be at 75 by 2030. So the execution capability of the company is a reality. It's not a surprise for me, but perhaps for some of you. And I just would like you to recognize this reality. In the meanwhile, our gigafactories are on. We have selected the five sites, Duvrin, Kaiserslautern, Thermoly, Windsor, and the Kokomo. in France, Germany, Italy, Canada, and the US. We have some very expert partners in addition to ACC, like LG and Samsung. You see the gigawatt hours capacity of those plants. We are on track to be at 400 gigawatt hours by 2030. And one of the big things that was highlighted a few months ago, which was how do we secure the raw materials, has been progressing significantly. You see here a list of five companies with which we have signed some strategic deals. It's about securing the supply of lithium, hydroxide, the supply of manganese, sulfate, nickel, and cobalt. And we have been securing the supply of those raw materials because we don't want to run out of battery supply the day the market starts really to achieve what we expect it will achieve. At the same time, we continue to develop our ecosystem of electric components. E-motors, our JV with an EDEC is now live, producing the M3 electric motor that I was mentioning, already equipping our B-segment BEVs. e-transmission bringing the electrified DCTs to the market this year, Factorial working on solid-state batteries for 2026, and Symbio in which we took a stake to have access to the best fuel cell technology on the stack. So all of this is now being set up. As you imagine, a few years ago, nothing of this existed. So I just would like to recognize the very strong contribution from our planning team, our purchasing team, our manufacturing team. I can tell you in the backyard, they have been working 24-7 to get this done. And it's also a demonstration that we are not talking about transformation. We are doing it. Please realize. We are not talking about it. We are just doing it. It's important that we understand that. Let's now go to one of our most exciting products, the new all-electric RAM 1500, the REV. You have seen it at the CES. It will come by the end of next year. Great deal of functionalities, fantastic design. a fantastic performance in terms of combining payload, towing, speed of charge and range. And I can tell you to a certain extent the fact that we are coming to the market after a few of our respected competitors is something that we are fully leveraging to bring the most competitive BVP pickup truck to the market. This is of course a big challenge for our North American teams And their talent and their focus will make the difference. And this is what we try to convey to you at the CES in January this year. From here, I have concluded some of the most impactful highlights. I would like to hand over to our CFO, Richard Parmel, that is going to give you all the necessary explanations on the numbers. Richard, please.