European automaker Stellantis has significantly reduced its financial projections for the year, citing a combination of factors including increased competition from Chinese electric vehicle manufacturers, higher costs associated with overhauling its US operations, and a worsening industry outlook.
The company, which owns a portfolio of brands including Chrysler, Dodge, Jeep, Fiat, Citroen, and Peugeot, now expects to burn through between €5 billion and €10 billion in cash this year, rather than generating positive free cash flow as previously anticipated. This downward revision is largely due to Stellantis’ decision to accelerate the normalization of its inventory levels in the US, which will involve reducing shipments to North America by over 200,000 units in the second half of the year.
Stellantis has also lowered its operating profit margin guidance to between 5.5% and 7.0%, citing lower-than-expected sales in the second half of the year across most regions. The company attributed this decline to intensified competitive dynamics, driven by rising industry supply and increased competition from Chinese automakers.
This news comes on the heels of similar profit warnings from rival automakers BMW, Mercedes, and Volkswagen, which have all cited challenges in the industry. British luxury carmaker Aston Martin also issued a full-year profit warning on Monday, citing supply chain disruptions and weakness in the Chinese market.
The European Union is currently finalizing plans for possible tariffs on Chinese electric vehicles, which could further exacerbate the challenges facing the industry. Stellantis’ revised projections are likely to be closely watched by investors, who have been critical of the company’s handling of its inventory levels and other operational issues.
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