Aston Martin warns over profits amid production woes

Luxury carmaker Aston Martin has warned over annual earnings and slashed vehicle production for 2024 as it suffers from supplier disruption and weak demand from China.

Shares in the British group plunged by more than a fifth in Monday morning trading as it said it would make around 1,000 fewer cars than first planned over the year after being hit by delays to car parts due to disruption at some of its suppliers.

The firm said that this, combined with the woes in China amid a more bleak economic outlook in the country, are expected to leave wholesale sales by volume down by a “high single-digit percentage”.

It previously forecast high single-digit volume growth.

The group cautioned that this would have an impact on profits, with underlying earnings now set to be below forecasts for 2024.

The profit alert followed just hours after Peugeot and Fiat rival Stellantis also cut its annual forecasts, citing worsening trading conditions in the industry.

BMW, Mercedes and Volkswagen have all recently warned over lower than expected profits amid a challenging car market, with a slowdown in demand for electric vehicles and slowing demand from China.

Aston Martin’s new chief executive Adrian Hallmark said: “It has become clear that we need to take decisive action to adjust our production volumes for 2024 given a combination of supplier disruption, the weak macroeconomic environment in China and a proactive decision to strategically re-align our production plans to optimise efficiency and achieve a more balanced delivery cadence in the future.”

The group has seen supplier troubles combine with it ramping up production following the launch of a raft of new models.

It said: “Concurrent with the significant ramp-up in production for the second half of the year, following new model introductions, the company is experiencing a growing number of late component arrivals due to disruption at several of its suppliers.

“As a result, an increasing number of vehicles are taking longer to complete, with these issues impacting the efficiency of its operations and delaying the delivery of its vehicles.”

Aston Martin delivered just 1,998 cars in the first half of 2024, nearly one-third fewer than the same period last year, while it also said in July that pre-tax losses widened to £216.7 million, down from £142.2 million.

The firm is in the middle of a multi-year turnaround effort kicked off by Lawrence Stroll, the billionaire who became its chairman in 2020 after taking a controlling stake in the firm.

Mr Stroll has already had to bring in new shareholders such as Saudi Arabia’s Public Investment Fund in recent years to help bankroll the car-maker.

He has also tried to raise Aston Martin’s profile by entering the brand into Formula One, although the racing business is separate from the listed company.

Mr Stroll said: “When the Yew Tree Consortium made its significant investment in Aston Martin in 2020, we did this with a long-term view of the necessary commitment and turnaround required to unlock the enormous value potential of this iconic brand.

“I remain steadfast in this view and now, with the calibre and experience Adrian Hallmark brings, I am extremely confident in the company’s ability to realise the full potential of its ultra-luxury high performance strategy.”

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “(Aston Martin’s) higher price point has arguably offered it some slight protection from general auto trends given its buyers aren’t typically short for cash.

“Next year’s guidance remains unchanged for now, but the valuation’s likely to come under further pressure until it can prove that the demand outlook remains on track.”