BREAKINGVIEWS-Stellantis’s EV handbrake-turn is a one-way street

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Pierre Briancon

BERLIN, Feb 6 (Reuters Breakingviews) - Stellantis STLAM.MI may look like it is using a sledgehammer to crack an egg, but it was a big egg. The European carmaker said on February 6 that it would take a writedown of about 22 billion euros ($26 billion) after paring down its electric vehicle business — almost equivalent to its 24 billion euro market capitalisation before the decision was announced. That fits into the global retreat of climate regulations and a backlash among consumers balking at the costs involved in changing their habits. But it’s also a road Stellantis boss Antonio Filosa will find it hard to reverse back up.

Despite a 20%-plus slump in Stellantis’s share price on Friday, investors are not overdoing it. While two-thirds of the writedown is non-cash, that still leaves 6.5 billion euros of hard payments Stellantis will be forking out over the next four years. Meanwhile operating profit and free cash flow for 2025 will be lower than expected, and the company is cancelling its 2026 dividend. Most of the cash outlay will pay for discontinued lines of vehicles and reduced production.

A writedown of sorts on the group’s electric ambitions was expected for both political and market reasons. U.S. President Donald Trump has terminated federal support for EVs and presided over a general backlash on climate policies. And in December the European Commission watered down its planned ban of combustion engine cars by 2035. But even though fuel-efficient cars continue to gain market share in Europe — battery-powered vehicles accounted for 17.4% of new car registrations in the EU last year and hybrid electric ones contributed another 34.5% — the progression is slower than expected.

Why Stellantis would choose to take a hit even bigger than the $20 billion that $55 billion Ford Motor F.N took in December is puzzling if only looking at Europe. But the hit is commensurate with the all-in bet that previous CEO Carlos Tavares had made on electric vehicles in North America, a region that represents 40% of the group’s sales. Stellantis struggled to sell full-electric pickup trucks even before political winds changed with Trump’s election in November 2024 - one month before Tavares resigned.

Friday’s announcement comes just a few months after Stellantis announced a $13 billion investment in the U.S. that may now be spent mostly on making fuel-powered vehicles. The group has couched its announcement in a lingo that chimes with the current mood in Washington, insisting on the “freedom of choice” of amateurs of gas-powered engines and a strategy that should be governed “by demand rather than command”. Even so, Stellantis is a less valuable company than U.S. rivals, and has lower operating margins than the likes of Renault RENA.PA and Volkswagen VOWG.DE. If the regulatory winds change yet again in Europe or in the U.S., it just made a potential return to the sector more expensive.

Follow Pierre Briancon on Bluesky and LinkedIn.

CONTEXT NEWS

Shares in Stellantis fell by as much as 24% on February 6 after the European carmaker said it would take a writedown of around 22.2 billion euros ($26 billion) in the second half of 2025, after scaling down its electric-vehicle ambitions.

The move follows similar, albeit smaller, writedowns by rivals, including U.S.-based Ford Motor and General Motors, as many Western automakers retreat from battery-powered models in response to the Trump administration's policies and soft demand.

The charges, to be booked in results for the second half of 2025, include cash payments of approximately 6.5 billion euros expected to be made over the next four years, it added.

(Editing by George Hay; Production by Streisand Neto)

((For previous columns by the author, Reuters customers can click on BRIANCON/pierre.briancon@thomsonreuters.com))