Stellantis' (STLA) credit rating was downgraded to BBB from BBB+ amid weaker-than-expected margins, market share losses in North America and Europe, and potential headwinds from US tariffs on imports from Mexico and Canada, S&P Global Ratings said Thursday.

The rating agency said Stellantis' 2024 earnings before interest, taxes, depreciation and amortization margin of about 5.8%, below S&P's 6.6% forecast, was due to a steeper-than-expected 12% decline in shipments. The company cut dealer inventories in North America but relied on price reductions and higher incentives, pressuring margins, according to S&P.

Market share in North America dropped to 7.3% in late 2024 from over 12% in 2019, while in Europe, it fell below 15% from more than 20% over the same period, S&P said. US tariffs on imported vehicles and parts could further weigh on earnings, with S&P estimating a 1.5 billion euros ($1.62 billion) EBITDA impact in 2025.

"We assume last year's inventory correction and wave of new models should lay the foundation for Stellantis to return to shipment growth," S&P said, adding that it expects profitability to remain below the threshold for a higher rating in 2025.

S&P said its stable outlook is based on expectations that Stellantis will stabilize its market position and achieve an EBITDA margin above 8% from 2026 while maintaining positive free cash flow and a net cash position.

Shares of Stellantis were down 1.7% in early Thursday trading.