Profit pressures continue in the global car industry, with the French-Italian-US group Stellantis and Aston Martin both joining the growing chorus of earnings downgrades on Monday.
In mid-September, German giants BMW and Mercedes downgraded their profit forecasts for 2024 and 2025, blaming weak demand from China for luxury cars.
Volkswagen, the biggest carmaker in Europe, also downgraded its outlook and warned that it would have to start closing factories in Germany (possibly two) and cut some employees in that country and elsewhere, with its subsidiary Audi looking to close a brand-new EV factory in Belgium.
Then, last Friday, VW issued a second downgrade, with its expected profit margin now estimated to be 5.6% this year, down from 6.5% to 7.0% just ten days earlier and over 7.5% in July.
Monday’s announcement saw Stellantis shares lose nearly 15% in trading in London, while Aston Martin shares fell 25%, citing component supply problems in China.
General Motors shares in the US also fell, down 3.5%. Nissan shares dropped more than 5%, and Ford shares fell 2%.
A significant loser was Toyota, the world’s biggest carmaker, whose shares in Tokyo slid more than 7% as uncertainty in Japan, following a change of leadership and a looming election on October 27, undermined investor confidence.
The Stellantis profit warning came just days after German automaker Volkswagen once again slashed its own annual outlook, now guiding for an operating return on sales of 5.6% in 2024, down from a previous range of 6.5% to 7.0%.
VW now expects sales revenue to fall by 0.7% to 320 billion euros (USD 356.7 billion) after initially anticipating an increase of up to 5%. Car sales are projected to be close to 9 million, down from 9.24 million in 2023.
Stellantis, known for brands such as Chrysler, Dodge, Fiat, Peugeot, Jeep, and Maserati, warned of lower-than-expected sales “across most regions” in the second half of the year. It now sees an adjusted operating income (AOI) margin between 5.5% and 7.0% for the full year of 2024, down from a previously expected “double-digit” outlook.
“The deterioration in the global industry backdrop reflects a lower 2024 market forecast than at the beginning of the period, while competitive dynamics have intensified due to rising industry supply and increased Chinese competition,” the automaker stated.
It also lowered its projections for industrial free cash flow to a range between minus 5 billion euros (USD 5.58 billion) and minus 10 billion euros, down from previously “positive” guidance, as a result of a lower anticipated profit margin and higher working capital over the second half of this year.
The automaker attributed the revisions to its guidance to “decisions to significantly enlarge remediation actions on North American performance issues,” but provided no additional details. Earlier this year, Stellantis was sued by shareholders in the US who claimed the automaker defrauded them by concealing rising inventories and other problems.
This warning will serve as grist for that legal mill.
