New Delhi

Aston Martin, the British luxury carmaker has issued a sobering financial update that has sent ripples through the automotive industry. The company announced a significant downward revision of its annual core profit projections and a reduction in its anticipated production volumes. This adjustment comes in response to persistent supply chain disruptions and a notable weakening of demand in the crucial Chinese market.

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The news had an immediate impact on investor confidence, with Aston Martin's shares plummeting by 8 per cent in early trading. This development aligns with a broader trend among European automakers, who have been increasingly vocal about the challenging business environment in China, which remains the world's largest automotive market despite recent economic headwinds.

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In light of these challenges, Aston Martin has been forced to revise several key financial and operational targets. The company no longer anticipates achieving positive free cash flow in the first half of the year, a goal that had been previously set. Aston Martin has reduced its 2024 wholesale volumes target by approximately 1,000 vehicles, a move aimed at addressing the current market realities and supply chain constraints.

The root of these issues, according to Aston Martin, lies in the growing frequency of late component arrivals due to disruptions affecting multiple suppliers. This has resulted in extended production times for vehicles and subsequent delays in deliveries to customers. The situation is particularly challenging as Aston Martin had recently phased out production of older models, with plans to ramp up production of new models expected to drive revenue and profit growth from the second half of the year onwards.

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Adrian Hallmark, Aston Martin's newly appointed CEO, acknowledged the gravity of the situation, stating, "Near perfect execution was required to meet the company's ambitious 2024 plan. However, it has become clear that we need to take decisive action to adjust our production volumes for 2024." This candid assessment highlights the complexity of the challenges facing the luxury carmaker.

The company now anticipates that both its adjusted core profit and wholesale volumes for the third quarter will fall below market expectations. Aston Martin has revised its gross profit margin forecast for the year, now projecting it to be "modestly" below 40 per cent, down from the previous target of approximately 40 per cent.

The Chinese market, which has been a key focus for many luxury automakers, has proven particularly problematic for Aston Martin. Sales in the region were already on a downward trajectory, prompting the company to announce plans in July to launch its next-generation sports cars in China, in hopes of revitalizing its presence in this critical market.

Aston Martin's struggles are not isolated within the automotive industry. Other major players are also grappling with similar challenges. Stellantis recently issued its own profit warning, while Volkswagen has reduced its outlook for 2024. Mercedes-Benz, another luxury marque, has twice lowered its full-year profit margin target in as many months.