Stellantis, the world's fourth largest carmaker, has significantly reduced its earnings forecast due to challenges in its U.S. operations and increased competition from Chinese automakers.

The company now anticipates a negative cash flow of between 5 billion and 10 billion euros ($5.6 billion to $11.2 billion) for the year, a stark contrast to previous expectations of positive cash flow.

In the first half of the year, Stellantis reported a 48% drop in net profit to approximately 5.6 billion euros, alongside a 14% revenue decline.

The automaker expects North American vehicle deliveries to decrease by more than 200,000 units in the second half of the year compared to the previous year, which is double the previously anticipated decline.

An excess inventory of unsold vehicles is driving down sales prices, contributing to disappointing financial results and investor concerns.

Stellantis, which includes brands like Chrysler, Jeep, and Peugeot, has seen a significant decline in U.S. sales, prompting the company to increase promotions and discounts to stimulate demand.

Amidst criticism from U.S. dealers and the United Auto Workers union over its financial performance, Stellantis is searching for a new CEO to replace Carlos Tavares.

In Italy, the company faces additional pressure from production cuts, leading to a one-day strike by autoworkers scheduled for October 18.

Earlier this year, Stellantis faced a lawsuit from shareholders who accused the company of misleading them about its financial health before reporting disappointing results.

Following the profit warning, Stellantis shares dropped by over 12% at the start of trading, reflecting broader investor concerns about declining profitability.

The automotive market is currently experiencing a downturn characterized by reduced annual sales forecasts and increased competition, particularly from Chinese manufacturers.

To adapt to these challenges, Stellantis has partnered with Chinese manufacturer Leapmotor to assemble vehicles in Eastern Europe, aiming to mitigate trade restrictions and taxes on imports.