Stellantis and Aston Martin shares drop sharply after profit warnings amid China woes

Stocks of European carmakers hemorrhaged early on Monday as Stellantis and British luxury brand Aston Martin issued profit warnings, citing broader industry challenges and difficulties in the world's largest auto market, China.

Stellantis on Monday trimmed its 2024 annual guidance on the back of deteriorating "global industry dynamics" and bolstered competition from China, sending Milan-listed shares lower on open.

The French-Italian conglomerate, known for brands such as Chrysler, Dodge, Jeep and Maserati, warned of lower-than-expected sales "across most regions" in the second half of the year. It now pencils in an adjusted operating income (AOI) margin between 5.5% to 7.0% for the full-year 2024 period, down from a "double digit" outlook.

"Deterioration in the global industry backdrop reflects a lower 2024 market forecast than at the beginning of the period, while competitive dynamics have intensified due to both rising industry supply, as well as increased Chinese competition," the automaker said.

It also lowered projections for its industrial free cash flow to a range between minus 5 billion euros ($5.58 billion) to minus 10 billion euros, from a "positive" guidance previously, as a result of a lower anticipated AOI margin and temporarily higher working capital over the second half of this year.

The automaker further attributed the revisions to its guidance to "decisions to significantly enlarge remediation actions on North American performance issues," but supplied no additional details. Earlier this year, Stellantis was sued by shareholders in the U.S. who claimed the automaker defrauded them by concealing rising inventories and other items, Reuters reported.

This month, Stellantis' U.S. dealer network criticized CEO