LDN - Business

US car market gives Stellantis, Nissan a rough ride

[July 25, 2024] By Nick Carey

LONDON (Reuters) - Problems in the highly competitive U.S. car market ranging from weak prices to high inventories and difficult logistics dented profits and hit shares of automakers Stellantis 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 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.

World No. 4 automaker Stellantis said it was working to address problems, primarily in North America, after delivering worse than expected first-half results.

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.

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's 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.

Stellantis has 20 new models planned this year, which the automaker hopes will raise its profitability later this year.

[to top of second column]

A Nissan logo is seen in a vehicle during the press day at the Los Angeles Auto Show in Los Angeles, California, U.S. November 17, 2022. REUTERS/Mike Blake/File Photo

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 also helped it offset prolonged weakness at home 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.

In what 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, 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."

(Reporting by Nick Carey; additional reporting by Daniel Leussink in Tokyo, Giulio Piovaccari in Milan and Gilles Guillaume in Paris; Editing by Josephine Mason and Elaine Hardcastle)

Back to top