Shares in Stellantis, the parent company of Chrysler, dropped nearly 14% in Milan after the carmaker reduced its forecasts for full-year profitability and cash flow due to weaker global sales and increased competition from Chinese rivals. The company, which also produces Ram Trucks, Jeep, Citroen, and Peugeot cars, attributed the downward revisions to corrective actions in North America, such as increased incentives on older models and disappointing sales in the second half of the year across various regions. Stellantis plans to reduce inventory levels in the United States and ship fewer vehicles to North American dealers in the latter part of the year.
The global industry backdrop has deteriorated, leading to a lower 2024 market forecast and intensified competitive dynamics, including rising industry supply and increased Chinese competition, according to Stellantis. The company’s struggles come on the heels of Volkswagen reducing its full-year outlook for sales and deliveries, citing a challenging market environment. Meanwhile, British luxury carmaker Aston Martin Lagonda also announced a drop in operating income for the year due to supply chain disruptions and macroeconomic weakness in China, resulting in the production of fewer vehicles and a significant tumble in its shares.
Western automakers are facing declining global demand and heightened competition from Chinese electric vehicle manufacturers, such as BYD and Xpeng. These Chinese companies are gaining market share in China and expanding into Europe, where the car market has contracted. Volkswagen has highlighted the substantial decrease in car sales in Europe, including its own sales decline, prompting the need for a company overhaul to increase efficiency and reduce costs. The automaker is currently in wage negotiations with a powerful union in Germany, which could potentially lead to factory closures.
Stellantis is dealing with additional challenges, including a recent recall of over 1.2 million Ram 1500 vehicles due to a software malfunction in the anti-lock brake system. The company also announced the layoff of up to 2,450 factory workers at an assembly plant outside Detroit as it halts production of the Ram 1500 Classic truck. Moreover, the United Auto Workers union in the US is threatening strikes against Stellantis, citing the company’s failure to fulfill guarantees outlined in a labor deal from the previous year. This latest profit warning adds to the mounting difficulties faced by Stellantis in an increasingly competitive and challenging automotive market.
