The European car market is in free fall: two giants have announced huge losses

Shares of European car manufacturers came into being lose Monday, following profit warnings from car giant Stellantis and the British luxury brand Aston Martinwho mentioned widespread industry challenges and problems in the world’s largest auto market, China, reports CNBC.

Stellantis on Monday lowered its annual forecasts for 2024, against a background of a decline in “global business dynamics” and competition from China, causing a decline in the group’s shares by almost 15% in Milan according to News .too.

The Franco-Italian conglomerate, known for brands such as Chrysler, Dodge, Jeep and Maserati, warned of lower-than-expected sales “in most sectors” in the second half of the year.

It is now within an adjusted operating income (AOI) margin of 5.5% to 7.0% for the full-year 2024 period, down from a double-digit outlook.

“A decline in the global business context shows a lower market forecast for 2024 than at the beginning of the period, while competitive dynamics have increased due to both more industrial supply and increased competition from China,” the automaker said.

The group cut forecasts for its operating free cash flow to a range of minus 5 billion euros ($5.58 billion) and minus 10 billion euros, from a previous “positive” forecast, due to expected lower AOI margin and higher temp. working capital in the second half of this year.

The automaker further attributed the revisions to its guidance to “decisions to significantly expand measures to address performance issues in North America,” but did not provide further details.

Earlier this year, Stellantis was sued by US shareholders who said the automaker defrauded them by hiding investments and other accruals, Reuters reported.

This month, the Stellantis US dealer network criticized CEO Carlos Tavares for the company’s recent decline in sales, factory production cuts, among other decisions they considered was damaging to the car manufacturer’s business.

British luxury carmaker Aston Martin, whose iconic models rose to fame through appearances in the James Bond film franchise, announced cuts to its profit margin and production target for this year.

The company announced a production cut of around 1,000 units in response to “disruptions to its supply chain and continued macroeconomic weakness in China”, expecting its earnings before interest, taxes, depreciation and amortization (EBITDA) for 2024 is now below the level. of the previous year.

The company said it no longer expects positive free cash flow in the second half of this year and noted that its full-year margin is expected to fall below 40%, compared to a previous target of around on that level.

Aston Martin said it is “addressing supply chain challenges and continues to recognize the significant market opportunity that China represents as its macroeconomic environment improves”.

The company’s shares ended Monday down 24.5%, the worst one-day drop since March 2020, according to LSEG data

Stellantis and Aston Martin’s profit warnings come days after German carmaker Volkswagen cut its own full-year outlook again on Friday, now expecting an operating return on sales of 5.6% in 2024. down from a range of 6.5-7.0% previously.

European automakers are struggling to gain a foothold in China, whose automakers are now focusing on expanding sales of electric vehicles in Europe.

The wider shift to electric vehicles “puts European carmakers under increasing pressure as overall new car sales do not return to pre-pandemic levels in their home markets”, analysts said. ING analysis warned at the beginning of this month. Volkswagen shares fell about 2% at the close of the stock market on Monday.