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  • 💶 European Automotive Industry Faces Tumultuous Times: A Confluence of Discounts, Warnings, and Challenges

💶 European Automotive Industry Faces Tumultuous Times: A Confluence of Discounts, Warnings, and Challenges

Author

Chris Reeves
September 30, 2024

TL;DR: Stellantis and Aston Martin are in the fast lane to disaster, with unsold cars piling up and profit warnings flying. Stellantis faces a 16% drop in U.S. sales, while Aston Martin's shares have plummeted 28%. It’s a tough time to be a carmaker—discounts might be the only way out! 🚗💸

What's Up in the EU?

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The European automotive landscape is undergoing a seismic shift as companies like Stellantis and Aston Martin grapple with declining sales, overflowing inventories, and fierce competition from China. Buckle up, folks; it's going to be a bumpy ride.

🙀 Stellantis Stumbles: Unsold Cars Galore

Stellantis, the automotive behemoth behind brands like Jeep, Dodge, and Chrysler, recently reported a staggering 16% decline in U.S. sales during the first half of 2024. As if that weren't enough, the situation is dire enough that Stellantis is resorting to heftier discounts on older models to clear out unsold inventory.

  • Current inventory: 330,000 vehicles by the first quarter of 2025 (ambitious, right?)

  • Projected shipments for H2 2024: 200,000 fewer than in the first half of 2023.

Why sell at a profit when you can sell at a loss?" — said no successful business ever.

To add salt to the wound, the Alfa Romeo Giulia, which has the dubious honor of being the slowest-selling car in the U.S., is currently languishing on dealer lots for 617 days. Not to be outdone, the Stelvio and Fiat 500e are following closely behind, with supplies averaging 456 and 454 days, respectively.

Looks like it's not just the cars that are running on empty.

Stellantis is not just facing a sales crisis; the company has also slashed its profit margin forecast from double digits to between 5.5% and 7%. That's a rough fall from grace for a company that had once basked in the glow of profit margins that left their competitors green with envy.

😿 The Market Reacts: Billions Wiped Off

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The fallout from Stellantis's gloomy outlook didn't stop there. European auto stocks collectively plummeted by almost 4%, erasing about $10 billion in market value. Stellantis shares alone saw a staggering drop of 14% as investors reacted to the storm clouds gathering over the automotive giant.

  • Stellantis shares: Down 38% this year, the worst-performing automaker in Europe.

  • Volkswagen: Shares down by 2.6%, with lowered profit outlooks.

  • Aston Martin: Shares plummeted 20% after cutting its production forecast.

When it rains, it pours—just not on the sales charts.

😾 Aston Martin: Not Just a Pretty Face

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Meanwhile, Aston Martin, the luxury carmaker known for its James Bond association, isn't faring much better. The brand has issued its own profit warnings, citing supply chain disruptions and waning demand in China.

  • Production target reduction: Approximately 1,000 vehicles for 2024.

  • Current share price drop: As much as 28%, their lowest in two years.

The Aston Martin of yesteryear is finding it hard to keep up with today's reality.

Analysts are now questioning whether Aston Martin can sustain its ambitions as a standalone luxury brand, especially as competition heats up in the EV market. The struggles in China are particularly concerning, given that the brand had previously anticipated a turnaround in that market.

😼 What's Next? A Look at the Bigger Picture

As the competition ramps up, especially from Chinese automakers that can churn out EVs at a breakneck pace, traditional European manufacturers are caught in a tough spot. They face:

  • Sluggish sales: A recent 18.3% drop in new car sales in the EU in August.

  • Rising costs: Both production and supply chain costs are escalating.

  • Potential trade wars: Tariffs on Chinese electric vehicles loom large, adding to the uncertainty.

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The European auto industry is like that friend who keeps saying they're 'just one more round' at the bar—except the drinks are getting more expensive and less fun.

😺 Final Thoughts

The European automotive sector has some thinking to do. It's sitting between the rising tide of competition from Chinese manufacturers and the realities of a sluggish market. The need for strategic pivoting and effective management is more crucial than ever. While Stellantis aims to shed its excess inventory through discounts, other companies like Aston Martin must reassess their production and market strategies to survive.

So, if you're in the market for a car, keep your eyes peeled; there's never been a better time to score a deal.

After all, in this game of automotive chess, it's not just about who makes the best car; it's about who can adapt faster.

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