Written by Yadarissa Shabong
(Reuters) – Aston Martin warned of falling annual profits and cut its production forecast on Monday due to supply chain challenges and persistent weakness in China, sending shares down as much as 28% and raising questions about its future ambitions.
The British luxury carmaker joined other European counterparts in pointing to the difficult environment in China, the world’s largest car market.
Aston Martin has stopped manufacturing older models, and ramping up production of new models is expected to drive growth and cash flow from the second half of this year.
“Near-perfect execution was required to meet the company’s ambitious 2024 plan,” new CEO Adrian Hallmark said in a statement. “However, it has become clear that we need to take decisive action to adjust our 2024 production volumes.”
Hallmark joined Aston Martin as CEO in September from British rival Bentley, and was tasked with reviving the group’s fortunes.
“We believe the new management team will now have to work hard to rebuild confidence about the financials, execution and near-term business potential going forward,” analysts at JP Morgan said in a note.
They said the warning raises questions about Aston Martin’s future ambitions, what it can offer as an independent company and as a result its fundamental valuation.
Aston Martin said it no longer expects to achieve positive free cash flow in the first half, and that it has reduced its 2024 wholesale volume target by about 1,000 vehicles to address this issue.
Aston Martin said a growing number of delayed component arrivals due to disruptions to many of its suppliers meant more cars were taking longer to complete and deliveries were being delayed.
Aston Martin shares fell as much as 28% to their lowest levels since November 2022.
Aston Martin sales in China were already declining. The group said in July that it would launch the next generation of its sports cars in China, hoping to improve its fortunes in the key market.
Stellantis (NYSE:) also warned on Monday about profits and Volkswagen (ETR:) cut its 2024 forecast on Friday, while Mercedes-Benz (OTC:) this month cut its full-year profit margin target for the second time in two months.