Aston Martin’s shares have plummeted by 20%, hitting a two-year low of 127½p. The luxury carmaker attributed this decline to significant supply chain disruptions.
The company has revised its 2024 production targets downward by 14% amid ongoing supply chain issues and macroeconomic challenges in China.
Impact of Supply Chain Issues on Production
The supply chain disruptions have notably impacted the production of four recently upgraded models. This has resulted in the Warwickshire-based company missing its yearly targets.
Aston Martin has announced it will reduce its 2024 production volume to 6,000 cars, down from the previous guidance of 7,000. The decision was influenced by supplier disruptions and China’s economic climate.
The company hopes to stabilise production in future quarters, although it anticipates it will not be cash flow positive in the second half of 2024.
Leadership’s Strategic Adjustment
Hallmark, new to Aston Martin from Bentley, outlined the company’s need for decisive action to adjust production volumes for 2024. He cited supplier disruptions and the weak macroeconomic environment in China as key factors.
“It has become clear that we need to take decisive action to adjust our production volumes for 2024 given a combination of supplier disruption and the weak macroeconomic environment in China,” Hallmark stated.
The company’s production has been specifically affected by insolvencies at key German suppliers Recaro and Eissmann, which supply seats and dashboards.
Struggles in the Chinese Market
Sales of the Aston Martin DBX 4×4, one of the company’s top sellers, have struggled in China.
The challenges in the Chinese market have exacerbated existing production issues.
Despite these setbacks, billionaire chairman Lawrence Stroll remained optimistic about the company’s long-term turnaround plan.
Financial Forecasts and Market Reactions
Goldman Sachs has revised its forecasts, predicting revenues in 2024 will fall by 5% to £1.54 billion, with EBITDA down nearly 2% to £269 million. This is a significant reduction from the company’s earlier projections.
The firm also forecasts a 25% increase in bottom-line losses, pushing the figure close to £300 million.
Barclays analyst Henning Cosman described the latest profit warning as “disappointing” and indicative of the company’s struggle to meet its ambitious 2024 plans.
Company’s Response and Future Projections
Despite current challenges, Lawrence Stroll has reiterated his long-term commitment to turning the company around. He expressed confidence in meeting 2025 targets of £2 billion in sales and £500 million in underlying operating profits.
The company’s third-quarter results are expected on October 30, coinciding with the UK government’s autumn budget announcement.
Aston Martin is projecting a stronger performance in 2025, with Goldman Sachs forecasting revenues of £2.07 billion and EBITDA of £540 million, alongside a pre-tax profit of £20 million.
Challenges with Suppliers
Insolvencies at key suppliers Recaro and Eissmann have significantly disrupted production. These suppliers are crucial for essential components like seats and dashboards.
The disruptions in the supply chain have necessitated a strategic adjustment to Aston Martin’s production plans.
Outlook for Investors
Investors are cautiously observing how the company navigates these supply chain challenges and market conditions.
Aston Martin is grappling with substantial supply chain issues, prompting strategic adjustments to its production plans. The company remains committed to its long-term goals, despite near-term financial setbacks. Investors will closely watch how effectively Aston Martin addresses these hurdles to restore confidence and achieve its 2025 targets.
