Stellantis: Navigating European EV Stumbles and North American Turnaround Hopes

Stellantis (STLA) stands at a crossroads. The automaker's European electric vehicle (BEV) ambitions face headwinds, while its North American operations hold the key to a potential earnings rebound. A recent downgrade by Bank of America (BofA) underscores near-term risks tied to weak profit margins and regulatory pressures, but investors must also weigh longer-term catalysts: a wave of new Jeep and Ram models, a 2026 earnings recovery, and a strategic 2029 overhaul. With shares down 50% over the past year, the question is: Is this a buying opportunity, or a value trap?

European BEV Struggles: Margins, Emissions, and Competitor Pressure

BofA's downgrade to “Underperform” reflects growing concerns over Stellantis' European challenges. While the company has boosted its EU30 market share to 17.3%, its BEV performance lags peers. Key issues:

1. Emissions Targets: Stellantis' fleet averaged 102g CO2/km in April 2025—9g/km above the EU's 2025–2027 target. Competitors like Volkswagen have narrowed this gap, while Stellantis risks penalties as regulations tighten.
2. Model Gaps: Despite success with hybrids (15.1% market share), BEV sales remain fragmented. The Citroën C3 and Peugeot 208 are modest hits, but the brand lacks a breakout model akin to Tesla's Model Y or BYD's Song.
3. Margin Pressure: Weak pricing power and high R&D costs for electrification have dragged margins. Stellantis expects a mid-single-digit AOI margin in 2025, below pre-pandemic levels.

North America: The Turnaround Catalyst

While Europe sputters, Stellantis' U.S. operations offer hope. Its Jeep and Ram brands are central to a strategy that could redefine the company's trajectory:

1. Jeep's Momentum:
2. The Cherokee mid-size SUV (launched in Q2 2025) targets a booming segment and has already drawn strong pre-orders.
3. The Wrangler 4xe (its top-selling BEV) saw 38% Q/Q sales growth in early 2025, proving demand for electrified off-roaders.

4. Three new Jeep nameplates are planned by 2026, each offering ICE, hybrid, and EV options—a flexible strategy to capitalize on shifting consumer preferences.

5. Ram's Resurgence:

6. The Ram 1500, with its HEMIV-8 return, drove a 17% sales jump in Q2 2025. Orders for the V8 engine hit 10,000 in 24 hours, signaling pent-up demand.

7. The Ramcharger range-extended EV (due in 2026) aims to blend electric efficiency with extended range—a direct challenge to Tesla's Cybertruck and Rivian's R1T.

8. Leadership Shift: New CEO Antonio Filosa has prioritized inventory discipline and dealer relations. His Q1 2025 reduction of U.S. dealer inventories by 100,000 units suggests progress in addressing past missteps.

The 2026–2029 Timeline: When Does the Turnaround Arrive?

1. 2026 Earnings Recovery: Analysts project a swing to positive industrial free cash flow in H2 2025, but meaningful earnings growth hinges on North American sales scaling up. The Ramcharger and Jeep's new models will be critical.
2. 2029 Model Overhaul: Stellantis has hinted at a full product lineup refresh by 2029, potentially streamlining its 14-brand portfolio and focusing resources on high-margin segments like trucks and SUVs. This could reduce costs and sharpen its focus—though details remain vague.
3. Long-Term Risks:
4. EU Regulations: The 2035 ICE ban forces Stellantis to accelerate BEV investment, risking further cash burn.
5. Chinese Competition: BYD and Chery are targeting U.S. and European markets, squeezing margins.

Investment Thesis: Hold for Q2 Results, Monitor 2026 Clarity

Current Risks:
- Near-term European BEV underperformance and CO2 penalties could pressure margins further.
- Cash burn remains a concern: Industrial free cash flow was -€6 billion in 2024.

Bull Case Catalysts:
- Q2 2025 earnings (July 29) could confirm Jeep and Ram momentum. A beat on EPS ($0.41 consensus) would ease investor fears.
- 2026 visibility: If the Ramcharger and Jeep launches meet sales targets, Stellantis could regain its footing in North America.

Stock Outlook:
- Shares trade at $9.87, near a 52-week low. A $12.50 price target by analysts hinges on execution of the turnaround.
- Hold rating: Wait for Q2 results and 2026 sales data before turning bullish.

Final Take

Stellantis is a “transition stock”—its European struggles are real, but its North American bets could redefine its value. Investors must balance near-term risks with the potential for a multiyear earnings turnaround. The July 29 earnings report is a critical first test. Until then, patience is warranted.

Risks to watch: EU CO2 penalties, U.S. tariff disputes, and BYD's market entry.