Shares in Stellantis, the parent company of Chrysler, plummeted nearly 14% in Milan on Monday following a drastic revision of its full-year profitability and cash flow forecasts. The Italian-American automaker, which also manufactures Ram Trucks, Jeep, Citroen, and Peugeot vehicles, cited weaker global sales and growing competition from Chinese electric vehicle (EV) manufacturers as key reasons for the lowered outlook.
In a statement, Stellantis revealed it expects to be significantly less profitable in 2024 than previously predicted. The company also warned that expenditures will surpass cash flow from operations, painting a challenging financial picture for the remainder of the year.
North American Struggles and Global Sales Decline
The company attributed its downward revisions to several factors, including “corrective actions” in North America. These measures include “increased incentives” on 2024 and older models to boost sales, which have been underwhelming in the second half of the year. Stellantis also announced plans to reduce inventory levels in the United States by shipping 200,000 fewer vehicles to North American dealers in the second half of 2024, compared to the same period in 2023.
“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 both rising industry supply and increased Chinese competition,” Stellantis said in its statement.
This warning comes amid a broader downturn for global automakers, who are facing waning demand and increasing pressure from Chinese car manufacturers, particularly in the electric vehicle segment.
Challenges Across the Industry
Stellantis is not the only automaker facing difficulties. German car giant Volkswagen also revised its full-year sales outlook downward last Friday, blaming a “challenging market environment.” Volkswagen’s shares fell 4.5% on Monday following the announcement. The company said earlier this month that the European car market is selling around 2 million fewer vehicles annually compared to pre-pandemic levels. Volkswagen itself is selling 500,000 fewer vehicles per year in Europe, roughly the equivalent of two car plants.
In addition to these struggles, Volkswagen is currently in negotiations with Germany’s powerful IG Metall union over wages and is considering its first-ever factory closures in the country. The automaker is undertaking a comprehensive restructuring to improve efficiency and reduce costs amid a serious economic backdrop.
Luxury carmaker Aston Martin Lagonda also issued a profit warning on Monday, saying operating income for 2024 would fall below last year’s levels. The British manufacturer cited supply chain disruptions and ongoing macroeconomic challenges in China as the reasons behind the expected shortfall. Aston Martin’s shares tumbled nearly 21% in London following the news.
Rising Chinese Competition
Western automakers, including Stellantis and Volkswagen, are feeling the heat from Chinese EV makers such as BYD and Xpeng, who are rapidly gaining market share both in China, the world’s largest car market, and in Europe. This increased competition is further squeezing traditional carmakers, which are grappling with weaker global demand.
For Stellantis, the challenges are piling up. In addition to the profit warning, the company has been forced to recall over 1.2 million Ram 1500 trucks due to a software malfunction in the anti-lock brake system. Stellantis is also facing possible strikes from the United Auto Workers (UAW) union in the U.S., which claims the company has not fulfilled guarantees from a labor agreement reached last year.
