European carmakers warn on profits

LONDON, Sept 30 (Reuters): European carmaker Stellantis joined on Monday bigger rival Volkswagen and others in warning about the worsening outlook for auto demand and rising costs, wiping billions of euros off the sector's market value.

The automakers are struggling with weak demand in China and the United States and a potential trade war between Beijing and the EU as the bloc prepares to finalise import tariffs on Chinese electric vehicles over alleged subsidies.

British luxury carmaker Aston Martin also issued a full-year profit warning on Monday, partly blaming falling demand in China, as Mercedes-Benz and BMW also did earlier this month.

Aston Martin's shares plunged as much as 20 per cent to their lowest in nearly two years.

Shares in Stellantis were down nearly 11 per cent, hitting their lowest since December 2022 as investors digested the scale of the world No. 4 automaker's problems. Stellantis shares have lost 38 per cent in value this year, making it Europe's worst performing automaker. The latest warnings follow Volkswagen's announcement late on Friday that it was cutting its 2024 profit outlook for the second time in under three months. Its shares were down a little over 2.8 per cent in mid-morning trading on Monday.

The German car giants have been reliant on China for around a third of their sales and have been hit by a weaker economy there and fiercer competition from domestic Chinese automakers and a vicious EV price war.

Falling European demand has not helped either. New car sales in the European Union fell 18.3 per cent in August to their lowest in three years with double-digit losses in major markets Germany, France and Italy and sliding electric vehicle sales.

Much of Stellantis' problems, however, stem from North America.

The expensive Jeeps and pickup trucks that Stellantis sells in the lucrative US market have generated virtually all of its profits since the automaker was formed out of the merger of FCA and PSA in 2021 and have made its profit margins the envy of its mainstream peers.