Businesses that dominate the automotive industry raised major alarms just earlier this week about sharp declines in sales. This situation, which is primarily affecting the Stellantis Group, is creating discontent and generating concern among investors in the industry.
Chinese competition puts international brands in trouble
The crisis we are talking about seems to have as its main protagonist, and triggering factor, competition from Chinese automakers. Competition is constantly growing from local manufacturers, which is combined with slowing domestic demand. These are all factors that are putting European automakers in great difficulty. Particularly affected by the situation is the Stellantis group, which has been reporting significantly lower than expected sales in recent periods in different parts of the world.
The automotive group itself, reportedly blamed this very negative event for the company on the deterioration of the industry environment globally, and at the same time, the intensification of competition from Chinese manufacturers.
The group is now grappling with various situations to manage
Yet the issues affecting Stellantis at present do not only involve external factors, as the group is also grappling internally with various situations to manage. One of the most important, is certainly the poor performance the group is achieving in one of its main target markets, namely North America.
This very factor could generate negative financial impacts even in the short term. Additionally to these critical situations, also we find that the CEO of Stellantis Carlos Tavares, has been subject to numerous criticisms in recent periods. In fact, Tavares is accused by U.S. concessions of implementing with strategic decisions suitable for improving the operations of automakers.
Stellantis stocks are not the only ones falling
The actions of Stellantis are not the only ones affected by the heavy situation, which is proving to be a rather intense period for many of the more traditional brands that have been established globally for decades. Also in the crosshairs are several German automakers and the luxury brand Aston Martin.
In fact, even Aston Martin, just like Stellantis, has made public negative updates on their profits. Even for the London-based company, the main factor that is driving this sharp decline seems to be precisely the ruthless competition from the Chinese automakers. With respect to Stellantis, we know that it has seen its forecast for the current year downward. The company in fact indicated an operating margin adjustment of between 5.5 percent and 7 percent, compared to its initial forecast of a double-digit increase. Moreover, the firm wanted to point out, that about 66 percent of this reduction was caused by the large number of corrective actions put in place to try to lift the U.S. market.
Aston Martin conversely, not immune at all to the current crisis has also had to reduce production targets, generating an obligatory drop in profit margins. Differently to Stellantis, which, as we anticipated, is affected by several factors that affect to worsen the situation, the British brand attributes this major drop to supply chain disruption and China’s major macroeconomic weakness.
Concerning announcements from investors
With the situation that we are talking about, it could only bring Stellantis rather discouraging announcements, as for investors the negative effects on the stock market made their appearance in immediate times. Unrestricted cash flow of the automotive group at the moment is set to face a decline of between 5 and 10 billion euros. Previously, however, estimates for this figure were characterized by a positive sign. Thus, following the announcement, the value of Stellantis’ shares experienced a meteoric drop amounting to more than 12 percent.
More than just Stellantis in crisis, Germans also revise downward
The warnings from Stellantis are not lonely as anticipated. In fact, we see automakers such as Volkswagen, BMW, and Mercedes-Benz that have also sharply decreased their profit forecasts, due to the weakness that is characterizing the Chinese market. An example of the rather drastic situation at the moment is that of Porsche Automobil Holding. In fact, according to Stifel analysts, the rating of the German automaker, which plays the role of the largest shareholder for Volkswagen, has been lowered, an element that confirms the difficult period for companies.
The negative impact on sales of globally important companies such as Stellantis and Aston Martin has generated a slump in the shares of both companies. Investors are showing major concerns regarding the prospects for the future of the automotive industry. Strong competition, coupled with the companies’ internal problems, puts a major strain on the smooth running of production lines and the resulting results. It will be seen what kind of strategy the crisis-affected brands will use to revive their businesses at levels.