Two unexpected developments happened on Monday that sent Stellantis (STLA) down by 12.52% on Monday. First, Stellantis cut its operating income margin for 2024. This suggests that the European automotive firm needs to slash vehicle prices and take an inventory write-down next.
Second, Chinese electric vehicles briefly soared before pulling back. Nio (NIO), Li Auto (LI), and XPeng (XPEV), despite losing money the more units they build, are an existential threat from automotive firms.
Stellantis is forecasting an AOI of between 5.5% and 7.0%, down from the previous expectation of at least 10% or higher. The free cash flow forecast is even worse. It expects FCF to fall by EUR 5 billion to 10 billion. Inventory normalization in the U.S. increased.
Luxury automotive firm Aston Martin (AMGDF) lost 23% yesterday. It warned markets that its wholesale volume target will fall by 1,000. The firm blamed supply chain disruptions.
European firms have serious headwinds from Chinese EV firms importing their vehicles. This hurts the U.S. market psychology for vehicles. During the pandemic, dealers charged customers five-figure mark-ups. Customers willingly paid because interest rates were dirt cheap. Today, consumers cannot afford those high-priced vehicles.
Watch out for General Motors (GM) and Ford (F) following Stellantis in cutting prices. Additionally, those firms may offer below-market rate loans or give generous incentives.
