Stellantis NV has significantly revised its profit margin forecast for the year, reflecting a more challenging environment in the automotive industry. The company now anticipates its adjusted operating income margin to drop to between 5.5% and 7%, a stark decline from the previous expectation of a double-digit percentage.
Revised Financial Outlook
In a statement released on Monday, Stellantis disclosed that it also projects industrial free cash flow to fall within a negative range of €5 billion ($5.6 billion) to €10 billion. This marks a significant shift from earlier guidance that suggested positive cash generation for the year. Following the announcement, Stellantis shares plummeted over 8% in Paris, hitting their lowest intraday trading level since December 2022.
Increased Competitive Pressures
Stellantis’s profit outlook adjustment comes amid a broader trend among automakers, including Volkswagen AG, which issued its second profit warning in three months. CEO Carlos Tavares has faced mounting criticism from investors, dealers, and unions due to declining sales figures, an aging vehicle lineup in the US, and growing inventory levels.
In response to these pressures, Stellantis is committed to more aggressive measures to align vehicle supply with demand. The company has set a target of reducing dealer inventory to no more than 330,000 units by year-end, a shift from the previously established goal of achieving this by the first quarter of 2025. To meet this target, Stellantis plans to produce 200,000 fewer vehicles in the second half of the year—double the earlier planned reduction—while also increasing promotional spending to incentivize sales.
Broader Industry Challenges
Stellantis’s situation is reflective of a broader struggle within the European automotive sector, where numerous manufacturers are facing sluggish sales and heightened competition from Chinese carmakers. In recent weeks, several major brands, including Aston Martin Lagonda Global Holdings Plc, BMW AG, Mercedes-Benz Group AG, and Volvo Car AB, have all lowered their profit forecasts.
Manufacturers are grappling with a slowdown in demand as they transition to electric vehicles, prompting them to implement measures such as job cuts and factory closures. Furthermore, they face increasing trade tensions and the looming threat of substantial fines from the European Union due to stricter CO2 regulations set to take effect next year.
Conclusion
The downward revision of Stellantis’s profit margin forecast underscores the complexities facing the automotive industry as it adapts to a rapidly changing market landscape. As the company embarks on a strategic plan to mitigate inventory issues and boost sales, it remains to be seen how effectively it can navigate these challenges while maintaining investor confidence in a competitive and evolving sector.
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