Stellantis: Quality Gains Fuel a Comeback – Why Now is the Time to Buy

Stellantis (STLA) is undergoing a quiet transformation. Once plagued by quality concerns and lagging margins, the automaker is now leveraging operational excellence to carve a sustainable competitive advantage. The Jeep Gladiator's recent segment-leading performance in J.D. Power's Initial Quality Study (IQS) is no fluke—it's the culmination of a years-long restructuring effort. For investors, this represents a compelling entry point into a company positioned to thrive in both traditional combustion engines and the EV transition.

The Jeep Gladiator's Quality Milestone: A Beacon of Progress

The 2025 Jeep Gladiator Mojave X, with itsFOX shocks, 33-inch tires, and 12.3-inch Uconnect 5 touchscreen, has tied for first in midsize pickup IQS rankings. This victory isn't merely a product of design tweaks. Behind it lies Stellantis' systemic overhaul of manufacturing processes, including “control towers” to resolve customer issues swiftly and stricter production thresholds to minimize defects. reveals a stock undervalued relative to peers despite its improving fundamentals.

The Gladiator's success also underscores Stellantis' ability to balance ruggedness with modern tech. While software glitches (e.g., connectivity issues) plague the industry, the company's integration of AI-driven platforms like STLA SmartCockpit aims to resolve these pain points. This focus on reliability will be critical as Stellantis ramps up EV production, starting with the Ram ProMaster van in 2025.

Brand-Wide Quality Gains: Beyond Jeep

Jeep's progress is part of a broader turnaround. In 2024, Dodge claimed the top IQS spot with 140 problems per 100 vehicles (PP100), while Ram's 1500 secured the best-in-class full-size pickup title. Even Alfa Romeo, long a laggard, jumped 24 spots in 2023. These improvements stem from Stellantis' post-merger integration of FCA and PSA's best practices, including European precision engineering for its U.S. plants.

The payoff? Margins are stabilizing. Despite a 48% net profit drop in H1 2024 due to currency headwinds, Stellantis reaffirmed its goal of double-digit adjusted operating margins by year-end. shows a narrowing gap between its performance and peers like Toyota (TM).

Operational Excellence Drives EV Resilience

The real test lies in Stellantis' EV transition. Here, its quality focus is a differentiator. While plug-in hybrids (PHEVs) face rising PP100 scores, battery electric vehicles (BEVs) improved by 33 PP100 in 2024. Stellantis plans to leverage its European EV expertise for North American launches, a strategy already yielding results: the Peugeot 3008 BEV garnered 30% of pre-orders in its first quarter.

The company's STLA platform—supporting up to 500-mile ranges—gives it a leg up in cost efficiency. By 2026, its Smart Car platform will underpin 13 affordable EVs, targeting price-sensitive markets. This scalability could offset Tesla's (TSLA) dominance in software, where Stellantis' ChatGPT integrations and AI-driven features are closing the gap.

Why Now?

The stock's current valuation—trading at 4.5x EV/EBITDA compared to Ford's 5.8x—discounts risks like lingering software issues and U.S. market share declines. Yet, Stellantis' 2025 product blitz (20+ launches, including the Maserati Grecale Folgore) and its 3% inventory reduction suggest a return to operational discipline.

Investors should also note the company's free cash flow trajectory. While H1 2024 turned negative at -€0.4 billion, management expects H2 improvements. could signal a rebound in 2025 as new models hit showrooms.

Risks and Conclusion

Stellantis isn't without challenges. Software defects in infotainment systems and higher EV R&D costs remain hurdles. However, its focus on quality-first manufacturing and EV specialization mitigate these risks. With a dividend yield of 4.5% and a stock down 20% from its 2022 peak, the downside is limited.

The Gladiator's IQS win isn't an outlier—it's proof that Stellantis can compete on quality in a fragmented market. For investors seeking exposure to a turnaround story with EV tailwinds and undervalued assets, now is the time to take a position.

reveal a path to leadership. Buy STLA with a 12-18 month horizon, and hold onto the hope that this comeback kid will finally deliver equity gains to match its operational progress.