Stellantis joins other automakers in 2024 profit cuts

Stellantis has joined a growing list of automakers in slashing 2024 profit forecasts over China’s increasingly competitive car industry and challenging market dynamics in the U.S.

Driving the news: Stellantis announced on Monday that it was cutting its annual profit guidance due to lower sales in China. It also cited an increase in cash burn in the U.S., where it is attempting to re-incentivize demand after sales dropped 21% year-over-year in Q2.

• Adjusted operating income is now between 5.5% and 7%, down from the previous “double digit” forecast, which Stellantis attributed to corrective actions in the North American car market.

• Expectations for industrial free cash flow were also lowered to a range of -$5.6 billion and -$11.2 billion. It previously expected a positive range.

• The company is also targeting 330,000 units of dealer inventory by the end of this year, sooner than its original timeline of Q1 2025.

• To achieve this goal, it is dialing back U.S. shipments by roughly 200,000 units for the second half of 2024, up from the initial reduction of 100,000 units.

Zooming out: Stellantis’ update is the latest in a long string of forecast revisions from the world’s top automakers, many of which were announced this month ahead of Q3 results.

• In the last four weeks, German automakers Volkswagen, BMW, and Mercedes Benz have each cut profit expectations from their original estimates. British car maker Ashton Martin joined Stellantis on Monday with its own announcement.

• Concern over profit cuts is creating difficulties for other Detroit manufacturers as well. Ford and General Motors both saw shares tumble in early trading hours after Stellantis’ statement.

• Q3 sales are expected to be lower than last year. September appears to have been a particularly challenging month, although this is mostly the result of fewer business days compared to 2023.

Zooming in: At the same time, Stellantis is facing unique challenges, ranging from a spree of executive departures in the U.S. to one of the worst inventory surpluses in the industry. Last week, the automaker confirmed it would be searching for a possible replacement for current CEO Carlos Tavares in 2026, although it clarified this was a part of “normal” succession planning.

Bottom line: Automakers are facing an uphill battle in 2024, some worse than others. With only a few months left in the year, the industry has precious little time to change its trajectory.

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