Stellantis' stock price drops in response to its profit warning, aligning with Volkswagen's similar announcement.
Stellantis (STLA), known for producing Ram Trucks, Jeep, along with Citroen and Peugeot cars, declared in a statement that they anticipate having lower profits in 2024 compared to their initial predictions, and their expenditures will outpace their cash flow from operational activities.
Their negative predictions were mainly influenced by adjustments in North America, including increased incentives on 2024 and older models and sluggish sales in the second half of the year across various regions.
Stellantis announced plans to decrease vehicle inventory in the United States and will let 200,000 fewer vehicles be delivered to North American dealerships in the second half of 2024 compared to the same period last year.
The company pointed out that a poorer global industry background is behind this, with a reduced 2024 market forecast and increased competition due to both an increasing supply within the industry and increased competition from China.
This pessimistic update was shared after Germany's Volkswagen reduced its full-year sales and delivery estimates for 2023, mentioning a "difficult market environment." Volkswagen's shares fell by 4.5% as a result, on Monday.
Additionally, British luxury carmaker Aston Martin Lagonda stated that their operating income in 2023 would be lower than the previous year's figure and would produce 1,000 fewer vehicles due to disruptions in their supply chain and continued macroeconomic weakness in China. Their shares declined nearly 21% in London.
Western automakers are currently dealing with slumping global demand and rising competition from China's electric vehicle manufacturers.
Chinese EV manufacturers, such as BYD and Xpeng (XPEV), are successfully taking market share from foreign carmakers in China, the world's biggest passenger car market, and are also expanding into Europe, where the car market has shrunk.
Volkswagen stated earlier this month that about 2 million fewer cars are being sold in Europe each year compared to pre-pandemic levels. Volkswagen itself is selling 500,000 fewer cars annually in the region.
Volkswagen is currently engaged in wage negotiations with IG Metall, one of Germany's most powerful unions, as part of a broader company overhaul that could result in the first-ever factory closures in their home country.
"To keep up with competition, we need to comprehensively restructure Volkswagen... because the situation is serious," the company said last week. "Volkswagen must improve efficiency and reduce costs."
Stellantis's latest profit warning is just one more piece of bad news they have recently experienced. The company has recently had to recall over 1.2 million Ram 1500 vehicles due to a software issue in the anti-lock brake system.
In August, the automaker announced potential layoffs of as many as 2,450 factory workers from an assembly plant near Detroit as they cease production of the Ram 1500 Classic truck. The company is also facing potential strikes from the United Auto Workers union in the US, which claims they have not met guarantees given as part of a labor agreement struck last year.
The business struggle of Stellantis is evident in their anticipation of lower profits in 2024 and their expenses surpassing their cash flow from operational activities, mainly due to adjustments in North America and sluggish sales.
In an effort to manage their financial situation, Stellantis has announced plans to decrease vehicle inventory in the United States and let 200,000 fewer vehicles be delivered to North American dealerships in the second half of 2024.
