Aston Martin and Stellantis Face Profit Setbacks Due to Global Market Weakness and Supply Chain Issues

Aston Martin Lagonda Global Holdings and Stellantis have both issued profit warnings, citing significant challenges in 2024 due to supply chain disruptions and weak demand in China. These announcements have had a severe impact on both companies’ share prices, with Aston Martin dropping 25% and Stellantis tumbling more than 12%.

Aston Martin Slashes 2024 Sales Forecast

British luxury carmaker Aston Martin Lagonda has announced that it expects to sell 1,000 fewer cars than initially forecast for the remainder of 2024. The company cited ongoing supply chain disruptions, including the delayed arrival of key components, as well as weak demand in China, as the primary reasons for this adjustment.

As a result of the slower-than-expected sales, Aston Martin’s adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) for 2024 are projected to come in slightly below the £305.9 million ($409 million) recorded in 2023. CEO Adrian Hallmark stated that the company is taking “decisive action” to adjust production volumes for 2024 in response to these challenges.

In addition to supply chain issues, Hallmark pointed out the “weak macroeconomic environment” in China as a significant factor. Despite this, Aston Martin still views China as a “significant market opportunity” in the long term, particularly as the country’s economic conditions improve.

Stellantis Lowers Earnings Outlook, Citing North American Struggles and EV Competition

Meanwhile, Paris-listed shares of Stellantis also dropped sharply after the automaker revised its 2024 earnings forecast. The company now expects to report an adjusted operating income margin between 5.5% and 7.0%, down from its previous estimate of a “double-digit” increase.

According to Stellantis, two-thirds of this downward revision stems from “corrective actions” taken in its North American operations. The company also highlighted increased competition in China’s electric vehicle (EV) market and a “deterioration in global industry dynamics” as other key challenges.

Stellantis also lowered its forecast for industrial free cash flow, which is now expected to fall between negative €5 billion and negative €10 billion, down from earlier positive projections. This shift is attributed to lower-than-expected sales in the second half of 2024 and elevated working capital requirements.

China’s Economic Struggles Weigh Heavily on Global Automakers

China’s economic slowdown continues to reverberate through the global automotive industry. German carmakers Volkswagen, Mercedes-Benz, and BMW have all recently downgraded their financial outlooks for 2024 due to weakening demand in China, the world’s largest auto market.

The impact is also being felt by major stakeholders in the industry. For instance, analysts at Stifel recently downgraded Porsche Automobil Holding to “Hold” from “Buy” due to concerns over its exposure to the Chinese market.

Conclusion: Tough Road Ahead for Automakers

As global supply chains remain disrupted and China’s economy continues to struggle, both Aston Martin and Stellantis are facing significant headwinds in the remainder of 2024. While both companies are adjusting their strategies to mitigate these challenges, the broader automotive industry is likely to continue grappling with these issues for the foreseeable future.

For investors, the profit warnings from these automakers serve as a stark reminder of the risks that come with an increasingly volatile global market. It remains to be seen how long these disruptions will persist and how companies will adapt to these changing conditions.

However, the future of the automotive industry will likely depend on how quickly these firms can resolve their supply chain issues and navigate the growing competition, particularly in the electric vehicle sector.

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