LONDON/DETROIT – Problems in the highly competitive US car market ranging from weak prices to high inventories and difficult logistics dented profits and hit shares of automakers Stellantis (NYSE: STLA) and Nissan on Thursday, as they scramble to find a fix.
Shares in Milan-listed Stellantis were down 8% by 0900 GMT after hitting their lowest in almost a year. Nissan was down 7%, sending the stock of its French alliance partner Renault down as well despite it posting a first-half profit that beat estimates.
Frankfurt-listed shares of U.S. automaker Ford Motor (NYSE: F) were also down 8% after its second-quarter profit missed analyst expectations overnight, weighed down by high warranty costs and an underperforming electric vehicle business.
Ford has been beset by structural inefficiencies and its electric vehicle business, which has been a drag on profits as it struggles to gain traction in that market.
The company reported a $1.1 billion operating loss for its EV and software unit in the quarter and expects that business to lose $5.5 billion for the year before taxes.
World No. 4 automaker Stellantis (NYSE: STLA) said it was taking steps to fix weak margins and high inventory in the U.S. after delivering worse-than-expected first-half results.
In a shift that highlights the pressure to revive margins and sales, CEO Carlos Tavares said he will not hesitate to axe underperforming brands in its sprawling portfolio.
“If they don’t make money, we’ll shut them down,” he said.
He has maintained since Stellantis was created in 2021 from the merger of Italian-American automaker Fiat Chrysler and France’s PSA that all of its 14 brands including Maserati, Fiat, Peugeot, and Jeep have a future.
Speaking to reporters, Chief Financial Officer Natalie Knight said the automaker was focusing on inventory reduction, logistics, prices, and production output in North America, which generates most of the group’s profits.
“(That) is the market that needs the most work,” Knight said.
WEAKENING OUTLOOK FOR SALES
Global automakers are facing a weakening outlook for sales across major markets such as the U.S., while also juggling an expensive transition to electric vehicles and growing competition from cheaper Chinese rivals.
Stellantis’ profit margins have been higher than its peers in recent years, but in a client note, Bernstein analysts noted that its margins were now not far above those of General Motors, which posted solid results earlier this week and raised its annual profit forecast.
“This raises questions over Stellantis’ cost efficiency reputation,” they wrote. Its shares have fallen more than 20% this year, the worst performer among the major European carmakers.
Stellantis (NYSE: STLA) has 20 new models planned this year, which it hopes will raise its profitability later this year.
The world’s number 3 automaker by sales, Hyundai meanwhile, outperformed some of its rivals, posting strong second-quarter results, lifted by U.S. sales of premium SUV models and hybrid vehicles, a move that helped it offset prolonged weakness in South Korea.
Nissan’s fiscal first-quarter profits though were virtually wiped out and it slashed its annual outlook as deep discounting in the U.S. market to get cars off dealer lots shredded the Japanese automaker’s margins.
CEO Makoto Uchida said it was a “tough one” to optimize inventory buildup in the United States and it would focus on better cars it can charge more for.
Like Stellantis (NYSE: STLA), Nissan plans to bolster sales from new and refreshed models in the second half, including the Armada and Murano SUVs.
“It’s totally unclear what vehicles that Nissan is selling in the United States are popular,” said Seiji Sugiura, an analyst at Tokai Tokyo Intelligence Laboratory.
“As the competitiveness of the models in their lineup is falling, they have no other choice but to make new vehicles, sell those, and hope that they will be popular.”
(Source: Reuters)
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