Faced with supply difficulties, Aston Martin is forced to readjust its forecasts for the current 2024 financial year. The British automotive giant is now forecasting a 14% drop in production. Annual profits are also likely to be affected.
Adrian Hallmark, CEO ofAston Martin Lagonda Ltd, announced early last week that he was revising production forecasts following the company’s first profit warning.
The Gaydon-based firm now expects to produce 1,000 fewer cars in 2024 than it had originally announced for the year. Full-year sales for 2024 are expected to be lower than for the previous year.
This revision of forecasts comes at a time when the British manufacturer is facing supply chain problems and a sluggish Chinese market. Aston Martin is the latest in a long line of automakers to report a slowdown in the market.
Strategic realignment
In the wake of the first profit warning announced by its new CEO, Aston Martin Lagonda Ltd reporteda disruption in the production of four car models. This situation has led the Warwickshire-based company to revise its targets for the year.
The carmaker said it was reducing its production volume for 2024 to 6,000 cars, a 14% drop on its previous forecast of 7,000 cars.
The company cited ongoing supply chain disruptions and macroeconomic challenges in China – the world’s largest automotive market – as the main reasons for the shortfall.
Presented by the company as a “strategic realignment ”, this reduction in the volume of cars leaving the factory is intended to stabilize production over the coming quarters, although the company has acknowledged that it will not be cash flow positive in the second half of 2024, as it had previously promised.
Adrian Hallmark, at the helm of the automaker since October 1 after almost 7 years as president and CEO of Bentley Motors, noted that Aston Martin’s ambitious plans for 2024 require near-perfect execution. “It has become clear that we need to take decisive action to adjust our production volumes for 2024 due to supplier disruption and the weak macro-economic environment in China”, he said.
Aston Martin sales were already on a downward trend in China. In July, Aston Martin Lagonda Ltd. announced the launch of new-generation sports cars in the country, in a bid to rectify the situation in this key market.
Natural disasters to blame
The company attributes this slowdown to supplier disruptions following recent fires and floods, which led to the late arrival of key components at manufacturing plants.
This has resulted in production slowdowns and delays in vehicles coming off the assembly line. Aston Martin production was particularly affected by theinsolvency of the main German suppliers, Recaro and Eissmann, who specialize in the manufacture of seats and dashboards respectively.
Sales of the Aston Martin DBX 4×4, one of the company’s best-sellers, have also experienced difficulties in China, compounding the problems.
Lawrence Stroll still confident
Despite these setbacks, Lawrence Stroll, Aston Martin’s billionaire chairman and Formula 1 enthusiast, who rescued the British company five years ago, remains confident.
He has renewed his long-term commitment to the company’s turnaround plan, believing that Aston Martin will achieve its 2025 targets. That is, sales of £2 billion with an underlying operating profit (EBITDA) of £500 million.
Aston Martin’s third-quarter results are due on October 30, the same day as the UK government’s autumn budget announcement. Despite the current challenges, the company expects a better performance in 2025, with Goldman Sachs forecasting sales of £2.07 billion and EBITDA of £540 million, as well as pre-tax profits of £20 million.
Far from an isolated case in Europe
Other European automakers have reported similar difficulties in fiscal 2024. Larger companies such as Mercedes-Benz, BMW and Stellantis – makers of the Jeep brand – have revised downwards their own profit forecasts for the year in a more uncertain climate for their industry.
For its part, Volkswagen said it might have to close plants in Germany for the first time ever, while Porsche reported a “severe supply shortage” for aluminum components in August, after a key supplier’s facility in Switzerland was flooded.
Despite Chairman Lawrence Stroll’s optimism intact, the announcement of the new CEO’s revised outlook sent Aston Martin Lagonda Ltd. shares plummeting to their lowest level since November 2022.
Analysts at JP Morgan commented : “We believe the new management team will now have to work hard to restore confidence in near-term finances, execution and commercial potential from here on in.
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