London
CNN
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Shares in Chrysler parent Stellantis plunged almost 14% in Milan Monday after the Italian-American carmaker slashed its forecasts for full-year profitability and cash flow, citing weaker global sales and increased competition from Chinese rivals.
Stellantis (STLA), which also makes Ram Trucks and Jeep, Citroen and Peugeot cars, said in a statement that it expects to be considerably less profitable in 2024 than it previously predicted and that expenditures would exceed cash flow from operations.
The downward revisions were driven by “corrective actions” in North America, such as “increased incentives” on 2024 and older models and disappointing sales in the second half of the year across most regions, the company added.
Stellantis said it would reduce inventory levels in the United States and ship 200,000 fewer vehicles to North American dealers in the second half of 2024 than in the same period last year.
“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, as well as increased Chinese competition,” the automaker added.
The downbeat update comes after Germany’s Volkswagen cut its full-year outlook for sales and deliveries Friday, citing a “challenging market environment.” Volkswagen’s shares were trading 4.5% lower on the day Monday.
Also on Monday, British luxury carmaker Aston Martin Lagonda said operating income this year would come in below last year’s level and that it would produce 1,000 fewer vehicles as a result of disruption in its supply chain and “continued macroeconomic weakness in China.” The company’s shares tumbled nearly 21% in London.
Western automakers are contending with waning global demand and rising competition from China’s electric vehicle manufacturers.
Chinese EV makers such as BYD and Xpeng (XPEV) are fast stealing market share from foreign carmakers in China, the world’s largest passenger car market, while also making inroads into Europe, where the car market has shrunk.
Volkswagen said earlier this month that around 2 million fewer cars are being sold in Europe per year compared with pre-pandemic levels. Volkswagen itself is selling 500,000 fewer cars annually in the region, the equivalent of around two car plants.
The world’s second-largest carmaker is currently locked in wage negotiations with IG Metall, one of Germany’s most powerful unions, as part of a wider company overhaul that could result in the first-ever factory closures in its home country.
“To remain competitively viable, we have to comprehensively restructure Volkswagen… because the situation is serious,” the company said last week. “Volkswagen has to increase efficiency and reduce costs.”
For Stellantis, Monday’s profit warning is the latest piece of bad news. The company has recently had to recall more than 1.2 million Ram 1500 vehicles due to a software malfunction in the anti-lock brake system.
And in August, the automaker said it would lay off as many as 2,450 factory workers from an assembly plant outside Detroit as it ends production of the Ram 1500 Classic truck. The company is also facing possible strikes from the United Auto Workers union in the US, which claims it has failed to deliver on guarantees given as part of a labor deal struck last year.