Aston Martin warns of lower annual core profit on supply chain, China woes

Aston Martin announced on Monday that it expects lower annual core profit and has revised its production forecasts downward due to supply chain disruptions and declining demand in China, leading to an 8% drop in its shares during early trading.

The British luxury car manufacturer is not alone; it joins several European automakers in highlighting the challenging conditions in China, the world's largest automotive market.

The company now anticipates it will not achieve positive free cash flow in the first half of the year and is reducing its 2024 wholesale volume target by approximately 1,000 vehicles to address ongoing issues.

Aston Martin cited an increase in delayed component arrivals from multiple suppliers, resulting in longer production times and postponed deliveries.

With the cessation of old model production, the company is banking on the ramp-up of new models to boost revenue and profit starting in the second half of this year. New CEO Adrian Hallmark stated that "near-perfect execution" was essential for the ambitious 2024 plan, but it has become clear that adjustments in production volumes are necessary.

The adjusted core profit and wholesale volumes for the third quarter are now expected to fall short of market expectations. Additionally, gross profit margins for the year are projected to be "modestly" below 40%, down from the previous target of around 40%.

Sales in China have already started to decline for Aston Martin. In July, the company announced plans to launch next-generation sports cars in China to revive its performance in this crucial market.

Other automakers are also facing challenges, with Stellantis issuing profit warnings and Volkswagen revising its 2024 outlook downward, while Mercedes-Benz has reduced its full-year profit margin target for the second time in two months.