Aston Martin Crashes, Stellantis Slides As Auto Slowdown Worsens For European Carmakers

Volkswagen, Mercedes, and BMW have all slashed their forecasts this month, with Aston Martin and Stellantis following suit on Monday morning. The broader picture reveals that the European auto industry has stalled. 

Aston Martin wrote in a statement Monday that it expects annual adjusted earnings before interest, taxes, depreciation and amortization margin in the high teens percentage, compared with a previous outlook of around 20s percentage. 

The British luxury sports car maker anticipates wholesale volumes will decline for the full year versus its prior growth expectation. The good news is the level of hemorrhaging cash in the first half will be lower in the second half. Management previously expected positive free cash flow in the second half.

The revision was blamed on "instability" across its supply chain and a slowdown in Chinese vehicle demand. 

"What is different now over the past six-to-nine months is the blue-chip suppliers have had fires, floods or administrators appointed to an extent and a scale that I personally haven't seen in my career," Chief Executive Officer Adrian Hallmark told analysts during a call. 

Here's Goldman analyst George Galliers' take on Aston's guidance cut:

Supply chain and China lead to guidance cut - This morning (30 September) Aston Martin cut its financial guidance for FY24 as a result of c.1k unit lower wholesale expectations. The company now expects wholesales to decline by a high single digit percentage YoY (FY2023 6,620 units) vs. high single digit growth previously. As a result, adj. EBITDA is also expected to be slightly below FY23 (£306mn) with a margin in the high teens %age, prior low 20s%. The company no longer expects to be FCF positive in 2H24. AML cited disruption in the supply chain, as suppliers have struggled to keep-up with the ramp on new models, and weakness in China as drivers of the downgrade. The company also mentioned a desire to smooth out wholesales, as it pursues its demand-led approach, which should result in less seasonal emphasis in 4Q, in our view.

Also, on Monday, Stellantis NV reduced its margin forecast for the full year, indicating that production will be reduced and that more promotional incentives will be available to customers in an increasingly competitive auto market. 

Stellantis wrote in a statement that the adjusted operating income margin will slide to 5.5% to 7% this year, down from a previous forecast for a double-digit percentage. It now projects an industrial free cash flow range of negative 5 billion euros ($5.6 billion) to negative 10 billion euros, versus prior guidance of positive cash generation. 

In markets, Aston shares in Europe plunged as much as 28%, while Stellantis dropped 8% in Paris to the lowest intraday level since December 2022.

According to a note from Goldman's Eric Mihelc and Scott Feiler, the slump in European automakers has now spread to US automakers.

Autos trading lower with F -3%, GM -3% in pre after rival car maker Stellantis revised down its 2024 financial guidance, citing deteriorating industry dynamics and Chinese competition. Stellantis, the European maker of Chrysler and Jeep, cut its guidance for the current year. It now sees its full-year adjusted operating income margin between 5.5% and 7.0%, down from prior "double digit," it said in a press release Monday morning, largely due to efforts to normalize inventory levels in North America. It said it accelerated its plan to reduce US inventory levels to no more than 330,000 by the end of this year to remedy the high inventory levels. British luxury car maker Aston Martin also cut its outlook Monday, citing weakness in China while Volkswagen gave their second profit warning in three months on Friday (Source: Barron's, Bloomberg).

Aston Martin and Stellantis now join several other European automakers, including BMW, Mercedes-Benz, and Volvo, in lowering their profit outlook this month as supply chain woes bite and China's slowdown dominates.