Luxury carmaker Aston Martin saw its share price drop by more than 20% after issuing a profit warning, citing supply chain disruptions and weakening sales in China. The company, renowned for its association with the fictional superspy James Bond, said it now expects profits to fall short of forecasts for this year.
The British automaker has been grappling with supply issues that have delayed production of new models, alongside a significant drop in demand from China, a key market for luxury brands. As a result, the company will manufacture about 1,000 fewer vehicles than initially planned in 2024.
Aston Martin, which sold 6,620 vehicles last year, attributed roughly a fifth of its sales to the Asia-Pacific region. However, China’s slowing economy has impacted the sales of high-end luxury cars, exacerbating the challenges for the brand.
Adrian Hallmark, Aston Martin’s recently appointed CEO, acknowledged the need for “decisive action” to adjust production but expressed optimism about the company’s long-term potential for growth despite the setbacks.
Stellantis and Industry-Wide Struggles
Aston Martin’s challenges mirror wider issues in the European car industry, where multiple carmakers are facing headwinds from declining sales and intensifying competition. On Monday, Stellantis, the parent company of brands like Peugeot, Citroen, Fiat, and Jeep, also issued a profit warning, leading its shares to fall by more than 14%. Stellantis has been contending with weak demand in the US market, forcing it to offer discounts to clear unsold inventory. The company is also facing mounting competition from aggressively expanding Chinese car brands.
The profit warnings from Aston Martin and Stellantis follow similar announcements from other European automotive giants. Volkswagen issued its second profit warning in three months last week, hinting at potential plant closures in Germany, while both Mercedes-Benz and BMW have downgraded their profit forecasts in recent weeks.
Falling sales in China, previously a booming market for luxury models, and the rise of Chinese competitors in global markets have been common factors behind these challenges. Matthias Schmidt of Schmidt Automotive Research noted that European brands, particularly German manufacturers, have been caught off-guard by rapid changes in China’s market, including aggressive discounting by local brands.
Decline in Electric Vehicle Sales
Sales of electric vehicles (EVs), which manufacturers have heavily invested in, have also faltered in Europe. According to the European Automobile Manufacturers Association, sales of battery-powered cars fell nearly 44% in August compared to the previous year. The decline in EV sales has been attributed to the reduction of buyer incentives in key markets such as France and Germany.
Amidst these challenges, the European Union is set to vote on Friday on imposing steep tariffs on Chinese-made electric vehicles, a move aimed at protecting local manufacturers from what the European Commission claims are unfair Chinese government subsidies. However, the proposed tariffs have sparked debate among European carmakers, with mixed reactions to the potential impact on the industry.
