Stringent incentive requirements challenge Stellantis dealers

Tight incentive requirements are making it difficult for Stellantis dealers to push leases despite Stellantis Financial Services ’ portfolio growth in the second quarter. Stellantis NV has pulled back incentive programs to specifically target certain vehicles and consumers already in a Stellantis lease, largely due to the desire to grow Stellantis Financial Services (SFS), Jay Slingerland , vice president of Corunna, Mich.-based Slingerland Chrysler Dodge Jeep Ram Fiat , told AFN . . Slingerland is also the national sales director for Credit Union Leasing of America , which has lost a large portion of its leasing share to SFS . [caption id="attachment_58343086" align="aligncenter" width="1024"]<img class="wp-image-58343086 size-large" src="https://www.autofinancenews.net/wp-content/uploads/2024/07/411132325-1024x683.jpg" alt="A truck displayed near an entrance to the Stellantis Warren Stamping Plant in Warren, Michigan, US, on Sunday, May 5, 2024. . Roughly 1,000 members of the United Auto Workers (UAW) will vote May 6 on whether to authorize a strike at Warren Stamping Plant north of Detroit. . Photographer: Emily Elconin/Bloomberg" width="1024" height="683" /> Photographer: Emily Elconin/Bloomberg[/caption] Many major manufacturers allow retail incentives to be applied to a lease that is financed through a credit union, bank or other lender outside of the captive, helping drive sales, Slingerland said. For example, since 2013 Santander Consumer USA , doing business as Chrysler Capital , has provided private-label financing for Stellantis NV . . Under that setup, Chrysler Capital offered subsidized rates supported by the OEM and unsubvented cash rebates could be applied to lease transactions that weren't financed by Chrysler Capital, Slingerland said. . That option is no longer available with the focus shifted to SFS, he said. Stellantis’ agreement with SCUSA is up in 2025 ; Tommy Moore , president and chief executive of SFS U. .S, previously said Chrysler Capital continues to get leasing volume. . Leasing makes up about 45% of SFS’ origination volume, he said. Focus on the captive Having a true captive has prompted Stellantis to pull back on incentives for other lenders’ leasing options, making them “virtually nonexistent” for consumers who are switching from a non-Stellantis vehicle or who purchased their prior car, Slingerland said. “With Stellantis Financial coming on board to be the primary leasing partner, they've done a good job in certain ways, but taking away retail incentives that could be used with other leasing partners is a major disadvantage for Stellantis dealers because all other OEMs allow this,” he said. “Beforehand, every vehicle that we had available for sale ... all had an incentive tied to them, whether with [SFS] or another lender.” Stellantis has scaled back to three main incentive programs across Compass, Grand Cherokee and Ram tied to leasing, Slingerland said. “Other vehicles are stand-alone; if you want to pay cash or finance it, there’s few dollars available,” he said. Consumers who aren’t already in a Stellantis lease may qualify for a lease rebate, but the amount is slashed compared to what is offered under the OEM’s lease loyalty program, he said. . For example, Stellantis is offering a $2,000 lease loyalty bonus cash offer on select Ram 1500 models through July 31 that only applies to eligible returning lessees, according to its website. “We're covering three model years with a constrained incentive mix, which is making it extremely problematic to pitch one model year over the other." -- Jay Slingerland, Slingerland Chrysler Dealers are also sitting on supply of model years 2023, 2024 and 2025, Slingerland said. “We're covering three model years with a constrained incentive mix, which is making it extremely problematic to pitch one model year over the other,” he said. “We have tons of cars to sell, but we don’t have a home-run program on any of them.” OEM eyes deals, inventory levels Stellantis is reviewing potential incentives and price adjustments that could be needed down the road, Stellantis NV Chief Executive Carlos Tavares said during the OEM’s July 25 earnings call. “There is no dogmatism in our approach. . We need to take care of spending [company funds] in the appropriate way,” he said. “What we are told by the dealers is that once the customers reach the showroom, the conversion rate in the showroom is excellent. ... . What is not good right now is that we are not generating enough leads.” “There is no dogmatism in our [incentives] approach." -- Carlos Tavares, Stellantis Stellantis is challenged by higher sticker prices compared to some competitors prior to the application of rate offers or discounts, Tavares said. “We are having an abnormal number of prospects that are opting out of the purchase funnel at the beginning of the journey because we are not bringing the sweetener strong enough and soon enough in the process to keep them engaged,” he said. The automaker on July 2 launched a select inventory bonus cash incentive program, providing up to $2,000 cash back on certain nameplates, Matt Thompson , head of U. .S. retail sales, said in Stellantis’ July 2 Q2 sales report. However, Slingerland said, “The incentives change dramatically in the sense that you find a run with certain vehicles that work well on the leasing or the retail platform, only for that incentive to go away 30 days later. . Trying to forecast and build up sales momentum has been difficult.” SFS portfolio increases Despite sales challenges, SFS’ portfolio reached the company’s initial yearend target in Q2, Tavares said during the earnings call. “Our U. .S. [finance company] is scaling up ahead of plan, more than $10 billion [in] receivables, which represents the target we had for ourselves in December,” he said. “We are ahead of plan and delivering quite nicely.” SFS was the 32nd-largest auto lender by outstandings volume at yearend 2023 with a portfolio of $7 billion, according to the latest Big Wheels Rankings data. U. .S. sales down 21%, inventory builds Stellantis shipped 838,000 units in North America in the first half of the year, a decline of 18.1% year over year driven by discontinued products, according to the OEM’s earnings presentation. . Stallantis’ U. .S. sales ticked up 4% quarter over quarter but decreased 21% YoY to 344,993 vehicles in Q2, according to the sales report. Supply is also a challenge, Slingerland said, noting that his dealership is sitting on seven to eight months of supply compared with the typical two months. . Stellantis “pushed all of their orders forward, which threw off dealer forecasting,” he said. “It varies by store, but everyone has doubled their days of supply.” Inventory sat at 94 days’ supply in the North America market at the end of June, Stellantis’ Tavares said on the earnings call. “We are going to work on [making] sure that we are aligning our production planning mix to the market mix,” he said. “We see that what we have in inventory is not always aligned with what the market mix requires." SFS is still in the early stages as a captive, and a lack of incentives could limit lease deals and cause challenges for the lender and the manufacturer, Slingerland said. “We want to support Stellantis Financial; their funding and visibility in understanding [funding] programs is very good, [but their] ability to get our customers back into similar payments that they're coming out of has been the biggest challenge,” he said. “We're seeing, on average, [lease] payments that are $125 to $175 higher per month compared to vehicles that customers are coming out of, even if it's the same car.” Auto Finance Summit, the premier industry event for auto lending and leasing, returns Oct. 7-9 at Wynn Las Vegas. . To learn more about the 2024 event and register, visit www. .AutoFinanceSummit.com.

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