Volkswagen: With Stellantis, Volkswagen and Aston Martin, a rain of warnings falls on the automobile market

(BFM Bourse) – Three car manufacturers issued warnings this Monday or Friday evening, further demonstrating how the sector is going through a difficult time.

It’s a black Monday for the European automobile market. The market must accept no less than three warnings on results from manufacturers. Two were issued this Monday, by Stellantis and Aston Martin, and one Friday evening, by the German Volkswagen group.

The three manufacturers are suffering during this Monday’s session. Aston Maron drops by 25% in London, Stellantis loses 13% in Paris while Volkswagen limits the loss to -4.4%.

The entire European automotive sector is struggling, with announcements from the three manufacturers encouraging investors to sell the sector as a whole.

The pan-European Stoxx Europe 600 Automobiles and Parts index lost 3.8%. Renault fell by 6%, suffering from a negative cross-reading of the market share, and automotive equipment manufacturers, such as Forvia (-8.3%), of which Stellantis constitutes one of the largest customers, or Valeo (-4 %), also fall.

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China weighs down Aston Martin

Stellantis has issued a heavy profit warning, slashing both its current operating margin and industrial cash flow projections for 2024. The manufacturer will thus burn between 5 billion and 10 billion euros of industrial cash this year.

This is due to its difficulties in the United States, where the group is forced to cut its prices on old models to clear stocks at its dealerships. As well as a more difficult global market. “Time is necessary to reestablish credibility after an alert of such magnitude,” judges Oddo BHF.

Aston Martin has also lowered its 2024 targets. The British premium brand has indicated that it expects volumes to fall by 6% to 9% (“high single digit”) this year, whereas the company previously expected an increase of 6% to 9%. . The adjusted gross operating margin (Ebitda) is expected between 16% and 19% compared to just over 20% previously. Cash generation will remain in the red in the second half of 2024 while the company previously wanted to move it into the green over this period.

“External factors within the global automotive industry, including supply chain disruption and weak demand in China, are now impacting Aston Martin’s volume outlook for the remainder of the year 2024,” the company explained.

“Alongside the significant ramp-up in production for the second half, following the introduction of new models, the company is experiencing an increasing number of late arrivals of components due to disruptions at several of its suppliers. As a result, it is taking longer to produce an increasing number of vehicles, impacting the efficiency of its operations and delaying the delivery of its vehicles,” she adds.

A sector to be scrapped?

Volkswagen, for its part, issued a profit warning on Friday evening. The company expects deliveries of 9 million vehicles in 2024 compared to 9.24 million previously, and revenues of 320 billion euros compared to 322.3 billion previously. Its operating margin forecast is lowered to 5.6%, compared to 6.5% to 7% previously. Net cash flow is expected around 2 billion euros, compared to 2.5 billion to 4.5 billion previously.

The group explains that it has lowered its outlook “taking into account a difficult market environment and developments which did not meet initial expectations, in particular for the Volkswagen Passenger Cars, Volkswagen Commercial Vehicles and Tech. Components brands”.

These profit warnings are in addition to those issued in recent weeks by Mercedes-Benz, as well as by BMW. The automotive supplier Forvia had also revised its outlook downwards on Friday, even though the market had reacted well, with investors fearing a “profit warning” worse than that actually announced.

In view of these multiple warnings, UBS judges that “the performance of the automotive sector in the weeks and months to come will be limited by the deterioration of fundamentals until 2025, regardless of the ‘value’ argument (the fact that manufacturers trade at very low stock market multiples, Editor’s note)'”.

Julien Marion – ©2024 BFM Bourse