Stellantis N.V. (NYSE:STLA) Q4 2022 Earnings Call Transcript

Stellantis N.V. (NYSE:STLA) Q4 2022 Earnings Call Transcript February 22, 2023

Operator: Hello and welcome to the Stellantis Full Year 2022 Results. I will now hand over to our host, Ed Ditmire, Head of Investor Relations, to begin today’s conference. Thank you.

Ed Ditmire: 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 release 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.

Carlos Tavares: 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 talking about transformation as 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 start-up company. If we look at some of the other numbers, we see that we had a very strong free cash flow with more than €10 billion, €10.8 billion, 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. Very nice number about cash synergies, net cash synergies at 7.1%, more than the commitment of 5 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 is 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 2024, we will double what we have today as we will be at 47 pure BEVs by the end of this year. It’s also important that you realize 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 started 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 RCV BEV market, we have 42.7% of market share in the LCV BEV 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 say that North America achieved a record margin on the full year at 16.4% AOI 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 tens 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 transaction 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 BEV sales — sorry, 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 you move to Europe, Europe was also able to deliver a record AOI margin at 9.9%, 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 e-208 and number one in Italy with 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 16.2%. And we were, to a certain extent, hurt by an outbound logistic 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 logistics 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 Trémery plant in France, and we are going to be live in 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 Durham , will be operating on the D-samples to validate the production and then go full production by the beginning of next year.

So in large, Europe is on track to deliver its electrification plan. In large, 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 logistics issues, and we will. And our manufacturing footprint is now ready, not only to manufacture the electric components, like the motors and the e-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 2021, 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 in the region 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. 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, 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 India, 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 adjusted operating income increase rates 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 is 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 Citroen 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 mature markets, i.e. the Chinese entrants in the mature markets. So we have the tool with a 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 here 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. We 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 1,500 BV 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 preorders for the next BV1500 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 BEV 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 old new Hornet that will start deliveries in H1 2023. So, we will reinforce the business of Dodge 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 increase is 52%. As you remember, for 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 these 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 Corsa continues to be a big success, number one selling car in Germany and UK on B-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 a great success, the number one selling car in EU30, Peugeot 208, the number one selling car on e-208, 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 e-208, but we’ll continue to reinforce its leading position. If we move now to the core brands with Citroen and Fiat, as I said, the big news is the launch of the new Citroen 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 Citroen 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 BEV’s are now coming. They will start this year in 2023. And you see now the power of Stellantis at work, all the new BEVs from Fiat as much as you 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 the 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 far away. We have achieved a 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-sized van fuel cell power 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 RCVs, 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 our Free2move. 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 Termoli 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 2026, pricing power improving, Ypsilon 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, 1% BEV launches from 2024. The LEV sales mix at 41%, which is already significant. Pricing power is fine. And we have just launched the new DS 3 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 Trémery. 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 GranTurismo, 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 a fantastic product, and we are very proud of GT 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 Cielo 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 are 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 US financial services. We have now enrolled around 90% of our US 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 ourselves 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 Spoticar to North America this year. And Aramis 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 Qinomic 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, STLA Brain, STLA SmartCockpit, STLA 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 aiMotive, which will be a strong accelerator of our ADAS developments.

This has been concluded and now aiMotive 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 Mobilisights. And we already have 13 million cars connected in operation. That was by the end of 2022, 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 this very expert partners. I think we are doing a good job in creating value together.

We see that STLA 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, BEV. What does it mean? It means that the execution capability of Stellantis in delivering the ramp-up of the BEV 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, Douvrin, Kaiserslautern, Termoli, Windsor, and 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 hour’s 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.

Emotors, our JV with Nidec 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 yet. We are doing it.

Please realize, we are 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. A 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 BEV 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 Palmer that is going to give you all the necessary explanations on the numbers. Richard, please?

Richard Palmer: Thank you, Carlos. So moving to page 20. The main metrics for the financials, our consolidated shipments were down 2%, as mentioned, to 5.8 million units, with lower shipments in Europe, down 8% year-over-year, partially offset by improvements in our other segments. In fact, industry volumes in North America and Europe were down 7% and 12%, respectively, or if we look at the EU30, down 6%, which was in line with our outlook. Middle East and Africa regions were slightly down, while the other regions saw moderate industry growth. Our combined sales were down 11%, with most brands showing lower sales year-over-year. Despite consolidated shipments being down 2%, our net revenues were up 18% at €180 billion, thanks to strong discipline on pricing, vehicle mix and positive FX translation.

Adjusted operating income was €23.3 billion, up 29% with a margin of 13%. Our industrial free cash flow, as mentioned, reached €10.8 billion, up 78%, including the momentum of the €7.1 billion of net cash synergies which exceeded our merger target two years in advance. This further strengthened our balance sheet with our industrial net financial position increasing to €25.7 billion. Liquidity was €61.3 billion with a modest reduction versus prior year of €1.4 billion, driven by the early repayment of the €6.3 billion credit facility within Intesa Sanpaolo in January of 2022, the €3.3 billion dividend distribution in April, and €1.1 billion paid in the repurchase transaction from General Motors regarding their warrants. And that was all largely offset by the strong positive €“ positive free cash flow for the year.

In terms of capital returns to shareholders, we intend to pay a €4.2 billion dividend, which is €1.34 per share, following the shareholder approval, and consistent with our dividend policy objective, that maintains a payout ratio of 25% of net profit. And secondly, we announced today that we will begin a share buyback program of up to €1.5 billion to be executed during 2023 in the open market. Moving to Page 21. We show the rest of the P&L. So from AOI to operating income, we reached €20 billion. We incurred unusual charges of €3.3 billion in 2022, with approximately €1.3 billion in the second half. For the full year, the accruals for restructuring accounted for about one-third of that number and were primarily related to European operations, approximately €1 billion was recognized for an extension of the Takata air bags recall campaign, primarily in Europe and North America and another €0.7 billion was related to the increase in the provision for US CAFE penalties that we booked in the first half related to the issuance of the final rule by NHTSA in March.

Financial charges for the year were €768 million, slightly up, reflecting higher FX and hedging costs in Argentina and negative impacts from hydro inflation in Turkey, partially offset by increased cash returns on our financial investments as interest rates increased. Our equity method income was €0.5 billion lower this year due to the €300 million non-cash impairment recognized in H1 related to the GAC-Stellantis JV exit and an estimated loss of €130 million as we go through the sale of our FCA Bank portfolio to Credit Agricole, which transaction will be completed in the first half of 2023. Tax expense was up €790 million at €2.7 billion, resulting in a 14% effective tax rate, more or less aligned with the prior year. As a result, net income was €16.8 billion.

Moving to Page 22. We look at the revenue development. As we mentioned, we’re up 18%. If we take out FX translation, we’re up 11%. We had a €2.8 billion negative impact on volumes, driven by a 234,000 unit decrease in Europe, partially offset by cumulative 90,000 unit increase across the other regions. Net pricing actions delivered an 8% performance gain year-over-year, or €12 billion, with all segments contributing positively and split relatively evenly across our three engines, North America, Xtend Europe and South America, plus MEA, plus China and India and Asia Pacific. Vehicle line mix was also positive, adding another €4.9 billion coming from Europe and North America and in Europe, in particular, partly due to a higher electrified vehicle penetration.

€10 billion was added due to FX translation of a stronger dollar and Brazilian real, more than offsetting the devaluation of Turkish lira. Completing the work, we had a positive €2.9 billion in the other category, primarily due to lower volumes of sales with buyback commitments in our European business and Parts and Service revenue growth. Moving to Page 23. Looking at the AOI development, and we get from our 11.8% margin last year to our 13.0% margin this year. Lower industry volumes in North America and Europe had a negative impact of about €2.8 billion compared to the prior year. Net pricing actions, as I mentioned, in all segments, led us to a €12.4 billion positive item. Vehicle line mix was positive due to 0.8 billion in Europe and 0.3 million in South America.

Those improvements allowed us to offset the negative impact from market share losses in North America due to continued supply chain constraints, particularly in the second half and logistics challenges, primarily in Europe. Industrial costs were negative €9.1 billion, primarily driven by increased raw material costs of €6.5 billion, with a sequentially higher impact in H2, but roughly in line with our full year estimate. We are also negatively impacted by energy cost inflation in Europe and other supply economics in the second half. SG&A was down in large Europe by €0.6 billion and in North America by €0.2 million, driven by continued cost containment and simplification of the organizational structure. R&D costs were up about €300 million.

And in the last bucket, we have an impact of €3.4 billion due to the change in dealer stock levels year-over-year, which is — which had a significant reduction in inventories in 2021 and an increase in 2022, as we replenished our dealer inventory levels, which we will look at in the further slides. Good progress on further diversifying our profit drivers, as Carlos mentioned, with 83% of group AOI from North America and in large Europe down from 89% in 2021 as we saw higher than average growth in South America, Middle East and Africa, China and India Pacific and Maserati. Lastly, H2 margins were 12%, and down 210 basis points versus H1. This reduction was driven by a reduction in North America margins as well as European margins and South America.

In both North America and in large Europe sequential pricing was still positive, but was offset by the negative volumes and higher sequential industrial costs, which caught up with the price increases we had taken earlier in the cycle. Moving to Page 24. We start with the regions, North America. North America had a very strong year, reaching 16.4% margins with both increases in the top line and in marginality. The industry was down more than 7% with our sales down 11% as commented earlier, with Jeep down 11% and Ram down 13%. Consolidated shipments nonetheless, were up 2% year-over-year to 1.9 million units as dealer inventory levels recovered from the especially low levels of 2021. We had a substantial improvement in our net revenues, up 23% due to the impacts of a strong net pricing, positive vehicle mix due to increased Grand Wagoner and Wagoner volumes and the transition to the new Grand Cherokee from the prior version as well as approximately €9 billion of favorable FX translation.

In terms of profitability, increased raw materials, components and logistics costs were more than offset through net pricing and mix improvements, leading to a record €14 billion AOI and 16.4% margin. It’s important to note that the second half was more impacted by supply constraints with shipments down sequentially 57,000 units and industrial impacts more negative than H1 due to raw materials, manufacturing performance and other inflation effects from direct materials and logistics. However, with the continued strong net pricing, we posted a strong 14.7% H2 margin. Moving to the next page, we look at enlarged Europe. We were impacted in the region by continued unfilled semiconductor orders as well as outbound logistics challenges in the second half of the year, leading to market share losses in EU30, down 3 points sequentially to 18.2% for the second half.

Our teams are continuously working to resolve these challenges. With respect to logistics, we have secured additional capacities and continue to strengthen our mid- and long-term partnerships with third-party transportation customers, while at the same time, improving our fulfillment processes. Despite lower shipments down 234,000 units or 8% we were able to increase our net revenues by 7% to €63.3 billion through net pricing actions, up 7% and favorable vehicle mix supported by our renewed and electrified lineup. We also benefited from the successful launch of the Alfa Romeo Tonale, which represented more than half of the volumes or for Alfa Romeo in H2. Thanks to this performance on the top line and positive effects from cost containment actions and used car profitability, we were able to more than offset the negative impact of industrial costs, of which €2.9 billion came from raw materials and €0.9 billion from energy inflation, with the remaining primarily related to component and logistics cost increases.

AOI margin closed just below the double-digit mark at 9.9% for the full year, an outstanding result achieved just two years after the merger and boding well for the future profitability in the region. Sequential margins were down from the 10.4% in H1 due to higher — due to volumes down 98,000 units and industrial costs increasing due to raw materials and other inflation on components, logistics and energy. Moving to Middle East and Africa on Page 26. The region doubled its adjusted operating income to €1.1 billion, continuing the trend from 2021, which was up over 80%. Despite industry sales declining 1%, our market share improved 20 basis points, thanks to growth in sales for Opel, Fiat and Ram. Consolidated shipments were up 4% to 283,000 units, mainly due to higher shipments for Opel models such as Mokka, Corsa and Crossland X.

Net revenues were up 24% at €6.5 billion with net pricing actions and market mix more than offsetting the negative impact from the Turkish lira devaluation. Standout profitability of 17.8% AOI margin was achieved in H2, representing a 230 basis point sequential improvement and leading to a full year margin of 16.7%, further underpinning our view of the bright prospects for this region. Moving to Page 27. We look at South America, where the team also achieved significant growth in AOI, up 130% in 2022 following a fivefold improvement in 2021. We reinforced our leading position in the region and its key markets with market shares in Brazil, Argentina and Chile standing at around 33%, 31% and 11%, respectively. In addition to the Fiat and Jeep Brands leadership, we also benefited from the success of Peugeot and Ram brands, which improved their shares in the region by 60 basis points and 20 basis points, respectively.

Consolidated shipments were up 3%, 859,000 units, primarily due to strong demand for three of all our all-new locally produced vehicles, the Fiat Pulse, the Jeep Commander and the Citroën C3, as well as higher Peugeot 208 volumes. Net revenues increased by 46% to €15.6 billion, supported by strong net pricing and vehicle mix as well as FX translation. Our strong commercial performance in the region allowed us to offset €1 billion of additional industrial costs, including €0.8 billion for raw materials, leading to more than €2 billion AOI, more than doubling from last year. Margins were strong at 13.1%, up from 8.3% last year. Moving to Page 28. We look at China and India and Asia Pacific and Maserati. Strong net pricing in China and India and Asia Pacific was the main driver for the 48% increase in adjusted operating income, along with favorable vehicle mix, mostly due to higher volumes for Jeep Grand Cherokee L, Meridian and Ram 1500.

Our net pricing efforts throughout the year helped us to reach a 15.5% AOI margin in the second half of the year, up 210 basis points versus H1 and bringing the full year margin to 14.5%. Also great steps forward for Maserati, achieving double-digit AOI H2 at 10.1%. For the year, AOI almost doubled to €200 million, thanks to favorable net pricing and vehicle mix due to the success of the MC20 and the all-new Grecale. Moving to our cash flow on Page 29. Cash flow was up 78% to €10.8 billion, as we mentioned, with a strong contribution from €7.1 billion of net cash synergies. Our EBITDA margin was at 16.7% for the year, one point better than last year and both an additional €6.1 billion of profitability year-over-year. CapEx and capitalized R&D were €1.7 billion lower, primarily due to timing and synergy realizations, which were around €4 billion in the year.

Adding expensed R&D, total CapEx and R&D spending represented about 6.6% of 2022 net revenues, down from last year at 8.6%. We expect the percentage to be back at around 8% of revenues in 2023. We also had a €4.8 billion negative impact from the change in net working capital due to a 134,000 increase in company vehicle inventories and increased trade receivables mainly due to a reduction in the level of factoring, partially offset by higher trade payables. Negative working capital balance was reduced from €13.8 billion to €9.4 billion due to the reduced factoring and increased vehicle inventory. Moving to the vehicle inventory on Page 30. As we’ve talked about, we continue to face outbound logistics challenges primarily in Europe, which impacted vehicle deliveries to our dealers and customers, particularly in the second half.

Since the end of Q3, we reduced our company-owned inventory from 275, 000 to 230,000 units with dealer inventories increasing from 651,000 to 844,000 units. We expect the situation in Europe to continue to improve through the first half of this year with a substantial improvement in Q1. Moving to our industry outlook and guidance on Page 31. We see moderate growth in all regions, even if the backdrop continues to be volatile. With regards to our guidance, we expect to continue to operate with double-digit AOI margins in 2023, leveraging our strong momentum and operating efficiencies gained over the past two years to offset headwinds which include improving but still disruptive semiconductor availability, supply chain and logistics constraints, especially in H1 as well as higher energy and labor costs.

As mentioned earlier, in 2022, we incurred total industrial cost inflation items of around €9.5 billion, of which €6.5 billion were raw materials, which we more than offset with strong positive pricing. In 2023, we expect a much lower raw material impact in particular, due to more favorable steel price. Carryover pricing will be a tailwind, but we do not envisage further price increases at the level seen in the last two years. We will continue to maintain strict pricing discipline. Opportunities for industrial efficiencies need to be addressed as the supply situation continues to slowly improve and the outbound logistics issues are resolved. Industrial free cash flows will be positive with increased investments in CapEx and R&D, plus higher levels of investment in battery JVs and associated supply chain, offset by improving working capital compared to 2022.

Thank you for your attention. I now hand back to Carlos.

Carlos Tavares: Well, thank you, thank you, Richard, for this detailed explanations. Let’s now step back and wrap up this first part of our presentation, and have a look at the way we are executing our therefore 2030 strategic plan. Looking at the three major pillars: Care, Tech and Value, it is fair to say that on the Care pillar, we are on our way to achieve our carbon net zero result by 2038. We reduced our carbon footprint by 11% in one year, only in 2022. We improved our quality, our product quality sharply by reducing by 30% the number of incidents in the first three months of usage, we have now 27% of our leadership positions, which are held by women, and we target 30% by 2025. And 100% of our HR processes have been aligned with diversity and inclusion commitments.

So on the Care pillar, we are on track. On the Tech pillar, as you have seen, our BEV sales are up 41%, and we will double the number of BEV’s on sale by 2024 against 2022. And the ramp-up of our BEV models is absolutely on track with the plan. We are now taking strong positions as a front runner on the hydrogen fuel cell power trains. We consider that we are progressing well on our three world-class software platforms as much as on our AI partnerships with the aiMotive acquisition. And we have invested in no less than 10 start-ups using our Stellantis venture arm and three of those projects will be launched this year. In terms of value creation, we are moving forward and fast forward with our US financial service operations. This is exactly what we wanted to deliver.

And I must say that we are pleased with the progress. We have seven accretive businesses, which have been prioritized to complement the core business, and those businesses are growing year-over-year. We see that all regions are now growing and delivering record profitability, and we see also that our overseas club outside of Europe and North America is now getting ready to become the third engine of our company with a 34% net revenue growth year-over-year. So last, what should we take away from this presentation? I would like to share with you three numbers. We are one company, one Stellantis. We are all moving in the same direction at the same pace. The direction is given by the strategic plan. People get it and we are blessed with a €7.1 billion of net cash merger synergies, which means that this merger is a bottom-up driven merger.

And I would like again to thank our employees for their maturity, for their understanding of what this represents for the future of our company. Point number two, we are fast progressing on Dare Forward 2030, and of course, the 41% BEV sales growth rate is demonstrating that, but the fact that between now and next year, we are going to double the number of BEV models is also very representative of the fact that we are not talking about transformation. We are doing it. And last but not least, our company is more than ever an all-weather company, a company that is highly resilient, highly focused, hard working. We all move in the same direction at the same pace because we are one company. And the best way to express that is to remind you that most probably, we are the benchmark of the automotive industry with a 40% breakeven point in our business, 40% against revenues, of course.

That means that the company is really strong. It’s robust. It’s transforming itself. It has the right technology, the right people, the right leadership, that means that we represent a significant potential for the future. We very much thank you for your attention, for your focus. We are now ready for your questions. Thank you.

Q&A Session

Operator: Thank you. We’ll now take our first question from Thomas Besson at Kepler Cheuvreux. Your line is open. Please go ahead.

Thomas Besson : Thank you very much. It’s Thomas Besson at Kepler Cheuvreux. I have three questions, please. Firstly, I’d like to start on cash returns. Could you explain what drove finally your decision to go for a specific 2023 buyback of 1.5 billion and give us your view on the possibility to eventually has been as well at one point in 2024, 2025, should the market continue to value luxury OEMs so differentially to master takes? Second question, I’d like to have a bit more comments about 2023 inflationary headwinds and offsets for Stellantis as well as comments on what we should expect in terms of Stellantis market share development by region, notably in Europe, as you saw your logistic issues and you get the normalization of your production?

And finally, a small question about contributions to be expected and cash requirements needed for some of your site businesses notably the US Finco and Symbio. I think you’ve mentioned you took a stake in the company. I think it’s still being discussed. So if you can say a bit more about that, that would be interesting as also cash returns, a bit more on the guidance and the US Finco and Symbio. Thank you.

Carlos Tavares: Well, thank you, Thomas. Thank you for your three very important questions. I would like to start with the second one about the inflation in 2023 and the market share in Europe, and then I will hand it back to Richard for the share buyback decision, that, by the way, was discussed at the Board level and decided with the full support of the Board. And I will take it back for the Symbio case later on. So what can we expect from 2023. First, the growing interest rates are now triggering some kind of slowdown of the economy. We can see it. We can see that some of the raw materials are cooling down in terms of inflation and some of them are even going down, which means that this is going to be a good contribution to the reduction of the total production cost, which is exactly what we have in the plan, which is to reduce our total production cost at a faster pace than the erosion of pricing power.

That’s what we are trying to see, and to execute. And I think this is already showing some results. We see that our total production cost tends to stabilize over the last few months, which is the expected consequence of the rise of the interest rates. And we believe that, that will continue in that direction. Of course, as you pointed out, there is now a rebalancing between the supply and the demand. We have now a significant amount of cars in our dealer network yards. I think we are close to 1 million cars in the dealer network, which means that the supply is back which means now the supply in the dealer yards, I’m not talking about the pipe or in transit, I’m talking about what you can find in the leaderships. The supply is there, which means that we have already the sales and marketing tools to start fixing the market share in Europe.

While we continue to execute more robust fix on the outbound logistics, which is not over. We are working on the IS platform, the outbound logistics platform that we call internally the OPT platform. We still have a few bucks that we are now taking care of and there is a specific task force taking care of those bugs for that software platform to be fully operational and rigorously operational. We are asking more and working more with our partners to have a better capacity on their side. We are also reinforcing our own capability. As you know, we have an outbound logistic company that we call IFS. This company has a significant potential to grow, and we are reinforcing our investments in that company to make sure that we put ourselves out of trouble very soon.

My guesstimation is that those operational issues will be fixed within the first quarter of this year, so very soon. And we’ll make sure that we fix them in the robust way so that they don’t backfire on us later on. But while I’m saying this, I also need to recognize that the number of cars we have in the dealer yards is already quite significant. So there is room to improve our market share immediately. That’s what I can answer to your question. I would like to go back to the share buyback topic and hand over to Richard, please.

Richard Palmer : Thank you, Carlos. I think Tom, when we talked about our plan, therefore in 2030, we talked about buying back around 5% of our share capital through the period of the plan through 2025. We bought back 69 million shares as we bought back the shares for the exercise of the GM warrants. So basically, the €1.5 billion would be the complement to get us to 5%. I think that’s really the very basic logic of the €1.5 billion. I think where we are today with our balance sheet, very strong, very good cash flow performance in 2022, and strong momentum in the business. We believe that it was a reasonable signal to shareholders in the market of the confidence of the company. So no other particular magic behind the €1.5 billion other than it’s the complement of the 5%.

For 2024-2025, I think we’ll see as we continue to operate, right? It’s all about performance and cash flow. Our cash flow was very strong in 2022, notwithstanding we had, as you saw in the walk across €4.8 billion of negative impact from working capital. We will have higher investments, as I mentioned, in 2023, both for our CapEx and R&D and for the capitalization of some of the electrification related joint ventures on batteries, in particular, and of the US Finco, which you asked about, and I’ll tell you the number this year should be about €0.7 billion of injection of equity into the Finco in the US this year. So I think we’re very confident about the cash flow generation for this year, but we’re not going to commit to prolonged share buyback at this stage.

We’re quite happy to be able to do this buyback this year. And obviously, our intention is to continue to reward shareholders for their loyalty and try and show our confidence in the business and the market may recognize the lack of valuation on our stock price.

Carlos Tavares: Thank you, Richard. That was another statement. What is clear is that we are proving you, Tom, that when there is a good cash generation, we have no mental lock on share buybacks. It’s just for your reference, it can happen, it can happen as soon as the results of the company are creating a situation where we are confident, we see that we can go on a difficult period if need be, again, thanks to our very low breakeven point. And if the opportunity comes, then we reward our shareholders with the appropriate share buyback. On the Symbio case, it has been a reasonable amount of money that will be possibly known in the future. We are coming to a similar shareholding position as the two other shareholders. So it’s very balanced as it should be.

And we believe that, that is going to give that company a good visibility for the future as we are going to be and keep our leading position on fuel cell-powered vans in the world and are talking not only about Europe, but also in the US. So I think it’s a good win-win for win-win-win for the three shareholders, and we are going to align our forces to go even faster in using the good scientific education that we have, not only in France, but around the world on this matter. So it’s just a complement to what we have already started doing. As you know, I would like to remind you that we are going on a high-volume production from the beginning of next year in our order plant. That’s what we can answer to your three important questions. Thank you, Thomas.

Let’s move on.

Thomas Besson: Thank you.

Operator: Thank you. We’ll now take our next question from George Galliers at Goldman Sachs. Your line is open. Please go ahead.

George Galliers: Thank you and thank you for taking my question. I had two questions really surrounding Slide 16 on electrification. Obviously, you’ve seen a very big improvement in your battery electric vehicle volumes and your market leader in commercial vehicles, in Europe and second overall. But when we look at the profitability in Europe, you’re still very close to a 10% margin. So the first question I had was, could you just give us some insight into how the gross margin on your battery electric vehicles faring compared to your ICE vehicles today and how you think that will evolve as you put all the different pieces of this ecosystem into place over the next two to three years? The second question I had was in reference to the CapEx. Richard, you did mention the capitalization of the various JVs around the batteries. Could you just confirm, is that included within the 8% CapEx ratio that you’re targeting? Thank you.

Carlos Tavares: Two very important questions, and thank you for raising that. I’ll take the first one, and Richard will take the second one. On the BEV, what we need to understand is that, that will perhaps surprise you, but we don’t take margins as a consequence of everything else. We drive the business to achieve the margins that we need to get from our investments. So we are driving the margins of the PHEVs and we are driving the margins of the BEVs, which means that at one point in time, what we may discover the two of us is that there is the need to ensure a higher price competitiveness because, for instance, of new entrants. And not only we are optimizing all of the costs of our electric power trains as we are fully vertically integrated.

But on top of that, we also consider that we need to work on more breakthrough ideas like the one I mentioned to you about the EV smart card platform-based vehicles that will represent another breakthrough in terms of cost for BEVs at the core of the market. So we are addressing it from both ends. One end is to say, we don’t take margin as a result of everything else. We drive margins, and then we allocate what needs to be allocated so that the margins are to a certain extent, protected. What is clear is that we need not only to take care of the amount of margin but also the rate of profitability because on average, the net revenue per unit of EVs is higher than the ICEs. So we are working on that. But so far, margins are not the big problem.

The big problem will come later, which is the affordability of BEVs for the middle classes. That is coming. That is coming within a few years, as we see the new entrants may set a certain level of pressure on the market. That’s why we are preparing with the EV Citroen C3 smart car platform based as an example. But of course, that can be used for other brands as need be. So we take it from there. And so far, the sales of BEV, as you have seen, have not impacted us on our earnings because our earnings are just record as you have seen. That’s how we see it, not easy, certainly. Not one single direction, it’s not only about selling the value of what we create through a high pricing. It’s also understanding that new entrants are coming, and against those new entrants with specific breakthrough plans that fortunately we could anticipate, because if we are manufacturing the new Citroën C3, EV right now in India is because we decided that three or four years ago, of course.

So that was hopefully a good anticipation of what could happen with new entrants. That’s my answer to your question. Let me hand over to Richard for the CapEx question.

Richard Palmer : Thanks, Carlos. So the CapEx and R&D of 8% does not include capital injected into the joint ventures, George. So that will include, obviously, the electrification joint ventures for batteries and other components and the US Finco. So I would expect that number to be for this year around 2%, maybe a little less of revenue. So we’re talking about a total envelope of up to 10% between the CapEx and R&D done in-house and the equity injections into the joint ventures.

Carlos Tavares : That’s a very precise answer. Thank you, Richard. Appreciate it. Let’s move to the next one. Thank you.

Operator: Thank you. We’ll now take our next question from Vince Bond at Automotive News. Your line is open. Please go ahead.

Vince Bond : Thank you. So your Belvidere assembly plant is going to be idle next week. What is your message to the workers who are going to be laid off?

Carlos Tavares : Sorry, which plants were you talking about?

Vince Bond : Belvidere assembly plant.

Carlos Tavares : So your information

Vince Bond : Jeep Cherokee plant

Carlos Tavares : Right. Your information must be wrong, because I was not in Belvidere recently. So I don’t know where you got that information from, but I was not.

Vince Bond : No, no, no. I don’t say. I said, so the point is being idled next week. What is your message to the workers while being laid off?

Carlos Tavares : Well, my message is very simple. By the way, not only to the workers, but to you also is very simple. We, as citizens have decided to go in electrification path, which is very, very expensive. This has been decided by the governments on the basis of what the parliaments have decided. So I just would like to tell you that the decision to go on a full electrification path is not a decision that’s been made by the carmakers. It’s a decision that has been made by the states, by the governments. Through the democratic process of listening to the parliament decisions and proposals, the states have decided to go electric. As you know, this is true for Europe. It is true for North America. From there, we have the responsibility to bring safe, clean and affordable solutions to protect freedom of mobility in our societies.

And that’s our mission. Our mission is to bring clean, safe and affordable solutions to ensure freedom of mobility to our citizens. This is exactly what we are doing. When we do this and we execute on physical evidence, what it means to bring a safe, clean and affordable vehicle, we see that there is a very significant challenge on cost. It is not our decision. It is the cost of the technology, specifically the cost of the technology when you start, you start developing a brand-new technology. This additional cost needs to be absorbed in a way or another. If you don’t absorb the cost, then either the market is going to shrink dramatically because the middle classes will not be able to buy EVs. If the market shrinks, then the industry needs to shrink or you don’t pass the cost to the consumer, you put yourself in the red, and you need to restructure your company because you have put your company in trouble.

So you see in both directions from a social perspective, it’s not very good. So what we need to do is to absorb in a few years because the time window is imposed on us, we need to optimize the way we go to market. We need to optimize the way we manufacture our BEV’s, we need to optimize the way we source the components of our BEVs to make sure that we absorb the additional cost of this technology to protect the affordability. So anything we will be doing not specifically with Belvidere but everywhere in the world, we’ll be aiming at absorbing the additional cost of a technology that was decided by the states by all the states, in a democratic process. And our job is to make it affordable, to make it safe, and to make it absolutely clean. That’s our job.

So do we take responsibility for transforming the company to adapt to this new world? Yes, we do. We take responsibility for transforming the company to adapt to a new world, this new world has been decided by the citizens. That’s not been decided by our companies. Our companies are in support of something that has been decided by the citizen. So every time we do something, we try to do it in a very humanistic way. And I think we have demonstrated that over the last years. We have demonstrated that we drive change in a humanistic way and respect our people because they are the highest core value of our company. At the same time, it would be demagogic not to tell them the truth. The truth is — the societies have decided a new way of enjoying mobility, our job is to make that new way clean, safe and affordable.

Right now, it’s not affordable at all. Right now, the big problem of electrification is to make it affordable, which means absorbing the additional cost, which means transforming the company to be able to bring that affordability to our citizens and our customers. That’s what we are doing. And I have no problem to tell you this in a very respectful and friendly manner as much as I have no problem to say the same thing to all of my employees. Thank you. Let’s move to the next question.

Operator: Thank you. We’ll now take our next question from Stephen Reitman of Societe Generale. Your line is open. Please go ahead.

Stephen Reitman: Yes, good afternoon. My two questions. First of all, on the change in dealer stocks. Obviously, they had a big impact in the first half, particularly in North America and a much smaller impact in the second half of this year. I’m wondering if you could give us some indication of how you expect this item to move in 2023? And secondly, to comment on production and the reception of the Grand Wagoneer, the Wagoneer, I understand those vehicles have faced quite severe component shortages, which is restricted, particularly production of the Grand Wagoneer. What’s the outlook for 2023? Thank you very much.

Carlos Tavares : Those are two great questions. With all the respect, my opinion on the first one is slightly different. I think that our company is enjoying a very strong order book right now. So what I would like to do for the first half is to bring back to my order book, FIFO inventory supply, which means making sure that all the cars I could not make in the past, because I didn’t have all the parts are not lagging behind, because those customers have been gracious and very kind to wait, and I would like to express to them my appreciation and express also my deep sorry for that. I would like to thank them for being patient, to be — for being loyal to our brands, and we are trying to fix that, so that we bring a reasonable lead time to most of our orders.

And we have a significant order book. So I think the first half will be mostly about using the order book we have, and putting the right sequence, the right FIFO sequence in delivering the order book. And then in Q2, depending on how the world economy is moving, we’ll see what is the order intake rate of Q2, which will be decisive to what will happen in H2. So what I would like to answer to your fair point is that, I think — on the first half, we are going to be protected by our order book. We are going to use this period to put more order and more better FIFO sequence in our inventories, recognizing that we have a lot of cars waiting in the dealer yards right now. So there is no lack of supply. But in some cases, we may not have the right supply or, in some cases, mostly in Europe, because there is a significant build to order rate.

We would be asking a few customers to wait too long and we want to fix that very quickly. So that’s the first half. Second half will be dependent on the order intake rate of the second quarter, which means spring. And that will depend on what? It will depend on the consumer sentiment. It will depend on how the world economy will be growing or not. Are we slowing down too much or not going down too much. It’s very much dependent on the decisions that are going to be made on interest rates, as you know very well. So I think it’s too soon to decide what the second half will be, I think, we’ll have to wait for the Q2 other intake trend. But we can say that for H1, we have a significant order book that we are going to enjoy fortunately. Thank you.

For the Wagoneer, your second question, Wagoneer is now back. Yes, we had some supply disruptions. I think we have fixed them and Wagoneer is back. That’s what we can say.

Stephen Reitman: Thank you.

Carlos Tavares : Next question.

Operator: Thank you. We will now take our next question from Philippe at Jefferies. Your line is open. Please go ahead.

Philippe Houchois : Yes. Thank you and good afternoon. It’s Philippe Houchois, Jefferies. Just wanted to a couple of questions. One, I think you answered Thomas earlier about market share recovery in Europe. I’m just wondering how you look at market share in North America given that you don’t have EVs yet in meaningful volume to maintain share in that segment. So what are you intending to maintain your share in North America? And the other question I have was on your — it’s interesting when I listen to carmakers had claims to be leader in commercial vehicles, and I think you are leaders, but everybody makes similar claims. As the profitability industry has improved in general, can you kind of comment about how you’re also driving profitability in commercial vehicles as the world moves to electrification.

And also I’m curious if commercial vehicles are still accretive to group margins at this stage, given that the general level of profitability has gone up. Thank you very much.

Carlos Tavares: Well, those are great questions. And I am pleased to answer to them. First of all, the fact that we are the leaders in the LCVs at least in Europe and Latin America is a no-brainer, but I will let you check and double check if needed. But in Europe and in Latin America, it’s a no-brainer that we are the LCV leaders, the numbers are outstanding. Then on the market share in North America, what I can tell you is that we were perhaps a little bit slow to move from a distribution of scarcity to a full supply of the market. We are now back to a good supply in the market. And that means that, of course, we need to go back from managing scarcity to going back to the sales and marketing pure tactics that we knew a few years ago.

I think on that corner, we could have driven a little bit faster, at the same time, we have been keeping very strong pricing power, which has also been one of the things that we have been protecting and we need to recognize that and take eventually some pressure on the share because of that. So I think the market share in D&A is just a consequence of the way we have been going around the corner, going from a lack of supply to a full supply of the market, going from a distribution of scarcity to a fully supplied market in terms of bringing the products to the consumers. And hopefully, that will be improving very soon. You also asked me about the profitability of LCVs. It’s a very good profit. It’s on the average of what we have in the company.

So it’s just a big, big business. And by the way, we have just given our LCV business unit more autonomy in terms of decision-making to make sure that they have their capability to adapt at a faster pace to the market conditions. And we have also a new leadership in place to be even more aggressive on the sales and marketing side. But of course, we will continue to protect, if not enhance our leadership in Europe and also in Latin America and somewhere else in the world. We have specifically big plans to develop our Ram pickup truck penetration and market share in many parts of the world, of course, starting with the US, but more than the US. And some more surprises will come for our competitors in terms of deploying the Ram brand across the world.

We are preparing for that. We are almost ready, and you’ll see this is going to be a big profit contributor for Stellantis. Thank you. Next question?

Operator: Thank you. We will now take our next question from Jose at JPMorgan. Your line is open. Please go ahead.

Jose Asumendi: Thank you. It’s Jose, JPMorgan. Hi, Carlos, Richard, a couple of questions, please. The first one, Carlos, on margins in North America. Can you discuss a little bit your outlook for 2023. How do you think about the possibility of maintaining margins in North America in 2023 at the level of 2022. And then second question on the Ram 1500 electric, obviously, a very competitive product. Can you comment on maybe the possibility that the target to match or even outperform the performance metrics we are seeing from peers, including the Tesla Cybertruck? Thank you.

Carlos Tavares : Great questions, Jose. Let me take it in the same order. Margins in NA. The good thing about NA is that we have found that there is a significant room of improvement in our own plans in terms of what we call internally the transformation cost. So there is an internal component and an external component. One internal component is the fact that our manufacturing system, when we look at the best practices we have around the world for Stellantis, we see that we have great opportunities in North America. Our local leadership team has recognized that. They have seen what those opportunities were, they have visited the other plants of Stellantis, and they have seen that some good things could be done to be much more efficient than what we are today.

So that’s a pot of opportunity that we have in our hands is to improve the transformation cost of our own manufacturing system in North America. That’s one. The second one is that we are now being very, very specific in the way we are using our marketing dollars to make sure that we bring the support where need be, but not in a way that is, I would say, vague. We are trying to be precise in terms of marketing tactics to use the money where we need to use it where the market demands. But in some other cases, it’s just a waste of money. We are trying to be quite picky on that one. .And of course, we have strong total production cost what we call war rooms, which are places where all the cross-functional teams gather to share ideas to reduce the total production cost of the products so that we protect our margins by reducing the total production cost, including the transformation costs in our plants, which is part of that faster than the erosion of the pricing power.

So too soon to say, Jose, are we going to be good enough in total production cost reduction to protect the margins or not? That’s the plan. The plan is to go faster on the TPC than in the erosion of pricing power. But we will see when we balance the H1, if we were able to do that or not. What is clear also is that the interest rate rise is quite helpful to cool down a certain number of inflation factors. And we see some of those inflation factors to be now disappearing, which could be good news for NA. On the pickup truck, what we have been doing is on a voluntary basis, we are being quite vague in the performance KPIs of our pickup truck, our BEV pickup truck. Why? Because we don’t want to give the information to our competitors. But what I can tell you is that we have spent many, many hours, including me, looking at the performance of our competitors and making sure that when we look at composite index of charging speed, range, payload towing, we bring the best offer of the market.

And I’m very excited by the quality of our engineering, some of it was demonstrated through the concept car you have seen in Las Vegas in January. I think they are doing a great job. Now we need to let them work, keep their focus, let them be focused on what they do. And hopefully, things will €“ will appear by the end of 2024. I’m very positive about the competitiveness of what we are doing. But of course, as always, planning is 10%, execution is 90%. So right now, we are focused on the execution, thank you, Jose. Next question, please.

Operator: We’ll take our next question from Martino De Ambroggi at Equita. Your line is open. Please go ahead.

Martino De Ambroggi: Thank you. Good afternoon. Good morning, everybody. The first question is on prices. So how Stellantis is behaving on prices considering the competitive environment. You mentioned Stellantis will remain disciplined. But could you elaborate a bit more on what is going on today? And what should we expect — what do you expect for the rest of the year? The second question is on the — your main worries. I remember in the last call, logistic issues in Europe and component shortages were the two main issues. But both seem to go in the right direction. So what are your main worries today? And last on guidance, I’m sorry to go straight on quantitative issues, but trying to get a quantitative indication, are you comfortable with consensus estimate, which are in the region of €18 billion adjusted EBITDA and €6 billion, €7 billion free cash flow for the current year. Thank you.

Carlos Tavares: Well, the third question is a $1 billion question. I will leave that one for Richard, the third one. And of course, I will let him comment the prices and the discipline. Let me talk about the worries because that’s something I can talk about, fundamentally in our industry, we are not worried anymore. You may think this is crazy, but it’s not about being worried or even concerned. It’s about understanding what is going to happen and anticipating on that to bring the appropriate countermeasures before actually the problems appear. So what are the worries that we could have on the global automotive industry scale. The first way that we could have is that this industry has been so much brutalized. Just think about the sequence of crisis.

Look at the pandemic, then semiconductor, then inflation, regulations, interest rates, et cetera. This industry has been heavily brutalized. So one of the things we should mindful is that car companies are made of people, people. It’s important. That’s why it’s important for me to tell my people today that I’m proud of them. This industry has been facing crisis-after-crisis, year-after-year for the last few years. And then we just throughout the industry, all the new regulations with a very short lead time, regardless of what the state of the art would mean. We need to recognize that this is a situation that may create problems at one point in time. So I think it’s time to say, ‘Hey, why don’t you try to create a little bit more stable environment so that people can work in a proper way.

What do you think?’ So if you talk about worries, I would say I’m worried for the automotive industry worldwide, because it seems that the respect to this industry has been decreasing as we throw out this industry more and more challenges and everybody just considers that this industry has no limit in its ability to digest challenges and crisis. I think that’s not fair for the people that work in the automotive industry. I think we should respect them and just recognize that there is a limit to human beings. And if there was one thing I would say, not for my company, because my company is really, I think, one of the survivors of the sequence, but I think for the overall industry, we need to start perhaps respecting the people that are working in this industry.

They are doing their best to bring clean energy, clean mobility, sustainable business models. They are doing their very best, but we cannot continue to throw out their face all the challenges that somebody else cannot solve. And that is important. It’s not specific to Stellantis, because I’m so high on the resilience of my people, but it’s something that strikes me, looking at my 42 years of automotive industry. I would like to conclude here on the worries and give it back to Richard for the $1 trillion question.

Richard Palmer : So the question is, am I comfortable or I’m worried?

Carlos Tavares: That may be it. We don’t know. We don’t know.

Richard Palmer : In the car industry, so I should be relatively uncomfortable, I think, based on what you just said. I think the guidance we gave is clear, Martino. Our goal is not to shrink this company, obviously. So the numbers you said — you gave us were — I think you said 18 billion of AOI, we did 23 last year. So that’s clearly not our target. We’re focusing on maintaining a very profitable business, a lot of price discipline. And we see, obviously, opportunities to do a very good result in 2023. So I think we’ll focus on that. You’ll see how we progress in the first half of the year. In terms of — obviously, the key point is probably, as you mentioned, is price trends on the one side and cost and raw materials on the other.

I think — and we’ve mentioned that we expect raw material inflation to be a lot lower in 2023 compared to 2022. We also expect some positive carryover pricing on the top line, I don’t think we expect to see the same level of further increases in prices that we have seen in 2021 and 2022, but we’re going to work very hard to maintain our pricing levels. I think in Europe, we have a very good portfolio. So there are grounds to believe that, that in the first quarter and into the second quarter should give us some stability in pricing. And then as Carlos said, we’ll see how second quarter orders go, and that will give us an indication going forward. In North America, our pricing is taking our products back to where they should be for the quality and the brands that we have.

So it’s a competitive game. The inventory numbers have been going up for everybody. We don’t feel uncomfortable with the level of inventory today. I think we do have some mix challenges in our inventory on Grand Cherokee as we fill out the lineup, as we’ve launched the new Grand Cherokee, and also filling out the lineup of the new version of the Ram as we finished the older version at the beginning of the year. So I think as our mix normalizes, and we get more lower mix product, I think that will help us to manage some of the pressure on — that we saw in share in the second half of the year. And then we’ll obviously manage the price function in a very disciplined way. So I think we’re quietly confident compared to the consensus you gave us, but it’s all about performance, obviously, so we’ll see.

Carlos Tavares: Thank you, Richard. Let’s take one more question.

Operator: Yes, we will take our last question from Michael at ODDO BHF. Your line is open. Please go ahead.

Michael Foundoukidis: Yes. Hi, Michael from ODDO BHF. So maybe a quick follow-up versus your previous answer, Richard. On the 2023 outlook. H2 is maybe a long way some uncertainty as you highlighted during the presentation. But at least in H1 and given what you said, how should we consider profitability compared to your H2 2022 performance, which has been hit by the many challenges you mentioned? So that’s the first question, specific on H1. And maybe a second one more long-term for Carlos, you highlighted the better-than-expected synergies to date. But the new models, which are based on the STLA platforms and the Tech pillar that you mentioned are only coming in 2023 and early 2024, could you maybe guide us a bit more regarding the magnitude of the financial benefits we could expect from this, notably in terms of cost per vehicle versus the existing platforms. Thank you very much.

Carlos Tavares: Well, thank you. Those are two great questions. Let me take that. When we say that at Stellantis, there is not old co, new co, there is one co, is because we consider that one co is what comes out of the benefit of this merger to use scale as a way to improve our cost competitiveness. And you can look at scale from two angles. One angle is how good are you at generating competitive variable costs. The other angle is how good are you at diluting your R&D and CapEx expense. In both cases, scale is important in both cases. So we just want to be consistent with what we have been doing, which was to create by automotive revenues, the third automotive car company in the world and use that scale, which is the outcome of this merger to the best benefit of our stakeholders.

That’s what we are doing. So we say it’s not old, new co, it’s one co, then we leverage our scale. And that scale is going to benefit the cost competitiveness of the STLA platforms. By the way, there is something that you know well, which is called bundling. You don’t always need to wait until you have the same hardware to benefit from the scale. But that’s exactly where we are going, and we want to be consistent with what we have done in creating Stellantis is leverage the scale, either to dilute the enormous amount of investments you make on R&D and CapEx on the new technologies through a bigger volume or to use it when you are looking for a better cost competitiveness with your partners. So we are comfortable with this consistency. We think it’s consistent.

And I think it’s the right way to go. At least when you look at our strategic plan, perhaps we should remind everybody here that our commitment while keeping a double-digit AOI margin is to double the net revenue. And this year, we were 18% up, so we are on track. And as Rich had mentioned, we are not here to shrink the company. From time to time, we may have bumps on the road, but we are not here to shrink the company. We are here to double the net revenue, and keep a high level of profitability that comes from our very demanding management of the business model. So we will keep that consistency. It’s all about being persistent. At one point in time, you are going to see something that is going to pop up. As for instance, you see today that with a 41% of BEV sales growth, we are among the best in the BEV sales growth.

As perhaps you discover that we are going to move from 23 models to 47 by the end of next year, which means the execution machine of Stellantis is now moving fast forward. And we try to be consistent with that. So far, it has been working, and hopefully, it will continue that way. On specifically 2023, as I told you, you have different contradictory factors, and it’s all about appreciating at which speed those factors are going to move from one side, the rebalancing of the supply and the demand is creating more pressure on pricing. But we are the most disciplined carmaker in the world. And from the other side, the interest rate rise is creating a cool down in the economy that is helpful to reduce the total production costs. Starting with the raw materials, which is also something that we start seeing.

So in fact, all of this is going to be a matter of sequence of the two factors. What is going to move faster? Is it the total production cost, variable cost reduction that is going to be ahead of the pricing power erosion or the opposite? And of course, on our side, we are trying to keep it this way. TPC first erosion of pricing power after. That’s, I would say, for H1. Then for H2, it’s all about what is going to happen in spring in terms of order intake trend. That’s where we are going to see what may happen in the second half. Right now, it’s too soon. And as you see — as you know well, things are much too volatile. So I don’t want to have a nice story to you. I just want to tell you what I think and what is our perspective on this matter.

So we are here as a 40% breakeven point company, quite agile, quite demanding in the way we run the business. We look for value, we don’t always look for volume. And we are absolutely committed to deliver the therefore 2030 plan, which is doubling our revenues and keeping a double-digit market profit by 2030. So that’s what we can share with you today, and I would like to thank you very much all of you for your very thoughtful questions. They always make us think better. I also hope that you understand that we have tried through the dividends and the share buybacks to send a strong message of confidence to our investors. We are here to make this work, and it is going to work. Stellantis will be one of the big winners of this big transformation.

And I think we have now all the components that we need to make it executable. And I just would like to thank you for your support. It has been a great run 2022 with you, and hopefully, we’ll make a better 2023. Thank you, and see you very soon. Bye-bye.

Operator: Thank you for your participation. You may now disconnect.