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Stellantis and Nissan have deepened fears that the global car industry is facing a prolonged downturn after profits at two of the biggest manufacturers plunged.
Shares in the companies tumbled on Thursday after the carmakers blamed increasingly cut-throat competition in the US and slowing sales growth of electric vehicles, a market that the industry has tied its fortunes to.
Profits at Stellantis, which is behind the Jeep, Peugeot and Fiat brands, dropped 48 per cent to €5.6bn in the first six months of the year, falling well short of expectations. Nissan’s earnings plunged 99 per cent in the fiscal first quarter.
“What has been happening on the industry side and competitiveness has been faster and more difficult than we expected this year, and the transition has been bumpier,” said Stellantis’s finance chief Natalie Knight.
After investing billions of dollars in their EV operations, traditional carmakers are now struggling as consumers balk at buying EVs that remain more expensive than petrol-powered cars. Earlier this week, Tesla, the world’s largest EV maker, laid bare the scale of the challenge facing the market after reporting a steep drop in profits.
As a result of the pressure on prices, Nissan slashed its annual profit forecast by almost a fifth to ¥500bn ($3.3bn). Its operating profits in the quarter to the end of June fell from ¥128.6bn to ¥995mn.
Chief executive Makoto Uchida said that “we were not able to expand our sales as much as we had expected due to an increase in inventory in the US, declining demand and increased competition”.
The weakening picture forced Stellantis to burn through almost $400mn of cash in the first half, leaving the company having to cut an extra €500mn in costs in the second half. It is also overhauling its pricing strategy in the US, where it said inventory was high. The company has equally been hit because it is phasing in 20 new car models this year and is adjusting its whole line-up accordingly.
Stellantis’s chief executive Carlos Tavares said the company’s results “fell short of our expectations, reflecting both a challenging industry context as well as our own operational issues”.
Shares in Nissan were down almost 10 per cent in Tokyo while those in Stellantis dropped 9 per cent in early trading in Paris.
Nissan’s woes have been compounded after the carmaker missed out on the resurgence in sales of hybrid vehicles, which consumers have turned to as an alternative to fully EVs.
The group has said it plans to launch seven new models in the US and Canada, including plug-in hybrids to revamp its ageing line-up of vehicles.
“This earnings result is quite dismal,” said Koji Endo, head of equity research at SBI Securities. “It’s shocking that its automotive free cash flow is ¥300bn in the negative and it’s only generating profit from its financial [car leasing] business.”
There was brighter news from French carmaker Renault, which lifted its profit margins in the first half of the year. Chief executive Luca de Meo told analysts the industry was confronting a “radically volatile and unpredictable” backdrop.
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