Aston Martin drops 28% after profit warning on supply chain, China woes

By Yadarisa Shabong

(Reuters) -Aston Martin warned of lower annual profit and cut its production forecast on Monday on supply chain challenges and dogged weakness in China, sending shares as much as 28% lower and raising questions around its future ambitions.

The British luxury carmaker joined other European peers in flagging a difficult environment in China, the world’s largest car market.

Aston Martin had stopped manufacturing old models, and a ramp-up in production of fresh models was 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. However, it has become clear that we need to take decisive action to adjust our production volumes for 2024,” new CEO Adrian Hallmark said in a statement.

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 around near-term financials, execution and business potential from here on,” analysts at JPMorgan said in a note.

The warning raises questions around Aston Martin’s future ambitions, what can be delivered as a standalone business and as a result its fundamental valuation, they said.

Aston Martin said it no longer expects to achieve positive free cash flow in the first half and that it was cutting its 2024 wholesale volumes target by about 1,000 vehicles to address the issue.

A growing number of late component arrivals due to disruption at several of its suppliers meant more cars were taking longer to complete and deliveries were getting delayed, Aston Martin said.

Aston Martin shares fell as much as 28% to their lowest since November 2022.

Sales in China were already on the decline for Aston Martin. The group said in July it would launch its next-generation sports cars in China, hoping to turn around its fortunes in the key market.

Stellantis (NYSE:) on Monday also warned on profits and Volkswagen (ETR:) cut its 2024 outlook on Friday, while Mercedes-Benz (OTC:) this month lowered its full-year profit margin target for the second time in two months.