Stellantis Scraps Key PHEVs, Exposing Deeper EV Strategy Strains

What happened

Stellantis has abruptly canceled its Jeep and Chrysler plug-in hybrid models, citing weak EV sales and quality issues, in a stark reversal from years of touting these vehicles as sales leaders. This move aligns with the DeepValue report's observation of a pivot to multi-energy platforms, driven by European overcapacity and negative industrial free cash flow that eroded profitability in 2024. The decision highlights persistent EV market headwinds, including slowing demand and price compression, which have forced Stellantis into plant shutdowns and aggressive discounts on small EVs in Europe. By scrapping these PHEVs, management signals that operational challenges are more severe than previously advertised, compounding risks from a CEO transition and unproven returns on $13B U.S. reinvestment. Ultimately, this development reinforces the report's view that Stellantis's fragile recovery hinges on precise execution amid mounting external pressures.

Implication

The PHEV cancellation underscores Stellantis's exposure to quality lapses and EV demand volatility, which could impair brand equity and near-term sales in key segments. It amplifies existing risks like negative industrial free cash flow and European plant underutilization, threatening profitability despite low valuation multiples. Investors must now scrutinize whether the $13B U.S. capex and Italian retooling can generate sufficient returns to offset these setbacks and drive sustainable growth. The upcoming H2 2025 results and 2026 Capital Markets Day will be critical litmus tests for management's strategy adjustments and capital discipline. Until concrete improvements emerge, maintaining a wait-and-see approach is prudent, as the stock's deep discount may not fully price in execution risks and potential value trap dynamics.

Thesis delta

This news does not shift the core investment thesis but strengthens the bear case by highlighting additional execution risks in Stellantis's EV strategy. It confirms the report's concerns about European operational stress and the precarious nature of the multi-energy pivot, emphasizing that recovery timelines could extend. Investors should view this as a reminder to prioritize monitoring of European output and cash flow metrics over optimistic narrative shifts.