European Carmakers Face Slowdown: Aston Martin and Stellantis Lower Forecasts

Aston Martin and Stellantis Adjust Forecasts Amid Industry Slowdown

Several European carmakers, including Volkswagen, Mercedes, and BMW, have cut their forecasts this month. Aston Martin and Stellantis joined the trend on Monday, further indicating a slowdown in the European auto industry.

Aston Martin announced on Monday that it anticipates its annual adjusted earnings before interest, taxes, depreciation, and amortization margin to be in the high teens percentage, a decrease from the previously projected 20s percentage. Furthermore, the British luxury sports car manufacturer predicts a decline in wholesale volumes for the year, contrary to its earlier growth expectation. However, the company expects the cash outflow in the second half of the year to be less than that in the first half, despite previously predicting positive free cash flow in the latter half.

Supply Chain Instability and Decreased Demand in China

The company attributes the revised forecast to instability in its supply chain and a slowdown in the demand for vehicles in China. Chief Executive Officer Adrian Hallmark noted that the scale and extent of issues faced by blue-chip suppliers, including fires, floods, and administrative appointments, are unprecedented in his career.

Goldman analyst George Galliers provided an analysis of Aston's guidance cut, attributing it to supply chain disruptions and weakness in China. He also noted the company's shift towards a demand-led approach, which is expected to result in less seasonal emphasis in the fourth quarter.

Stellantis Lowers Margin Forecast

Stellantis NV also adjusted its margin forecast for the year on Monday, indicating a reduction in production and an increase in promotional incentives for customers in the increasingly competitive auto market. The company now expects the adjusted operating income margin to be between 5.5% and 7% this year, a decrease from the previously projected double-digit percentage. Stellantis also revised its industrial free cash flow range to a negative 5 billion euros ($5.6 billion) to negative 10 billion euros, a departure from the earlier guidance of positive cash generation.

In the markets, Aston Martin's shares in Europe dropped by up to 28%, while Stellantis' shares fell by 8% in Paris, reaching their lowest intraday level since December 2022.

Slowdown Spreads to US Automakers

According to a note from Goldman's Eric Mihelc and Scott Feiler, the slump in European automakers is now affecting US automakers. The note mentioned that auto trading was lower with Ford and General Motors, following Stellantis' revision of its 2024 financial guidance due to worsening industry dynamics and competition from China.

Aston Martin and Stellantis join other European automakers, including BMW, Mercedes-Benz, and Volvo, in reducing their profit outlook this month, as supply chain issues continue to affect the industry and China's slowdown becomes more prominent.

Bottom Line

The European auto industry is facing a significant slowdown, with major players like Aston Martin and Stellantis revising their forecasts due to supply chain instability and decreased demand in China. This trend is not only affecting European carmakers but has also started to impact US automakers. It raises questions about the future of the auto industry and how these companies will navigate these challenges. What are your thoughts on this situation? Feel free to share this article with your friends and discuss it. Don't forget to sign up for the Daily Briefing, which is available every day at 6 pm.