Stellantis' EV Charge Confirms DeepValue Warnings, Raises Governance Red Flags

What happened

Stellantis has disclosed a €22–22.2 billion charge, acknowledging its EV rollout was based on overly optimistic market assumptions, leading to an investigation by Levi & Korsinsky. This event starkly reveals the depth of miscalculation in Stellantis' electrification strategy, which the DeepValue report had flagged as a key risk. The report already noted that Stellantis faces structural challenges, including negative industrial free cash flow and European plant underutilization, such as Italy's production hitting a 71-year low. Management's admission of optimistic forecasts underscores governance issues and aligns with the report's bear scenario, where European overcapacity overwhelms benefits from U.S. investments. Consequently, this development validates the report's cautious stance and highlights increased execution risk in the company's turnaround efforts.

Implication

The €22 billion charge directly impairs Stellantis' balance sheet, reducing book value and signaling potential for more write-downs as EV realities set in. It exposes poor forecasting and governance, undermining confidence in management's ability to execute the multi-energy pivot amid ongoing CEO transition risks. This reinforces the DeepValue report's bear scenario probability, where European issues persist and industrial free cash flow remains negative through 2026. Investors should expect heightened volatility and possible legal repercussions from the investigation, adding to existing headwinds like price cuts and overcapacity. Overall, the wait-and-see recommendation is now more justified, with attractive entry points likely shifting lower given the amplified downside risks.

Thesis delta

The disclosure of a massive charge due to optimistic EV assumptions shifts the thesis towards increased skepticism about Stellantis' strategic execution and governance. It validates the DeepValue report's identified risks, particularly around electrification missteps and European structural challenges, suggesting that the base and bull scenarios are less probable. Therefore, the investment case now hinges even more on concrete evidence of operational improvement, but with higher downside risk from potential further impairments and legal scrutiny.