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Investing.com -- Shares of French automotive supplier Valeo (EPA:VLOF) extended their losses on Tuesday, tumbling more than 8% following last week’s earnings report, as investors reacted to disappointing sales in China and shifting dynamics in the global auto market.
Valeo reported on February 27 total sales of €21.49 billion for 2024, down 2.5% from the previous year, with original equipment sales falling 2% on a like-for-like basis.
The company’s China operations were particularly weak, with original equipment sales in the country plunging by 8%, underperforming the broader automotive market by 10 percentage points.
The sharp drop in sales came as Chinese automakers, leading the global EV transition, gained market share at the expense of legacy suppliers like Valeo.
“Against a backdrop of faster growth for new-energy vehicles and market share gains by Chinese automakers, the Group continues to reposition its customer portfolio (around 50% of original equipment sales and around 60% of order intake in 2024 were with automakers in China, excluding joint ventures),” the company said in a statement.
Despite improving profitability metrics—an EBITDA margin increase of 1.3 percentage points to 13.3% and a rise in operating margin to 4.3%—the market remained focused on the company’s revenue trajectory.
Investors appeared particularly concerned about the headwinds facing Valeo’s high-voltage electrification business, which saw a staggering 39% decline in sales, largely due to reduced production at certain European EV platforms.
The broader European automotive market also posed challenges for Valeo, with the company highlighting a slowdown in EV adoption on the continent.
Production levels for battery electric vehicles and plug-in hybrids declined, impacting demand for some of the company’s key components.
Valeo is sticking to its 2025 financial goals: €21.5-22.5 billion in sales, up to 5.5% operating margin, and up to €550 million in free cash flow (after restructuring).
However, due to carmakers postponing orders and changing EV plans in a shaky market, Valeo’s growth is still questionable.