Magna, in unusual step, lowers 2026 outlook on EV uncertainty, contract assembly woes

Magna International Inc. took the unusual step of lowering its outlook for its 2026 financial performance as North America's largest supplier grapples with automakers reducing, postponing or canceling electric vehicle targets amid soft sales growth.

Magna expects sales of $44 billion to $46.5 billion in 2026, down about 10 percent from guidance it gave in February. It had projected sales of $48.8 billion to $51.2 billion. Magna now anticipates an earnings margin before interest and taxes of 6.7 to 7.4 percent, compared with previous expectations of 7 to 7.7 percent.

The company does not typically update its multiyear guidance in the middle of the year. But given rapidly changing EV plans from automakers, as well as the loss of Fisker production in its contract assembly business and volume shortfalls in its active safety business, the company needed to adjust expectations, said Magna CEO Swamy Kotagiri. Fisker filed for bankruptcy in June.

"The market has shifted drastically," Kotagiri said on an Aug. 2 call with analysts and investors.

The move reflects increased uncertainty, as EV sales growth continues to fall short of previous expectations. Many automakers in recent months have detailed plans to delay, reduce or otherwise alter EV production plans while oftentimes planning increases in hybrid or internal combustion engine vehicle production.

Magna cut its 2026 sales forecast by about $2 billion because of changes to EV plans alone, a number that is partially offset by $800 million to $900 million in increased ICE vehicle business.

The company said it would reduce engineering spending by up to $200 million and reduce capital expenditures by about the same amount in response to lower sales expectations. It also plans to look for ways to optimize its footprint and portfolio, Kotagiri said.

Moreover, Magna will reorganize the cost structure in its complete vehicle assembly business. It cut its 2026 sales forecast for the unit by $2.2 billion, reflecting in large part the end of Fisker Ocean production and canceled plans to assemble the Ineos Fusilier EV.

The change in outlook came as Magna reported second-quarter earnings results. The supplier said net income for the quarter fell 7.7 percent from the same period a year earlier to $313 million on roughly flat sales of $10.96 billion.

The supplier's earnings before interest and taxes margin fell to 5.3 percent from 5.6 percent in the same period a year earlier because of restructuring costs, an unfavorable product mix and lingering supply chain issues.

Reduced new-vehicle production among the Detroit 3 in North America hurt Magna's product mix during the quarter. While production rose 2 percent globally and 1 percent in North America, Magna said it had declined 5 percent among Detroit-based customers.

The company said it took a $19 million hit to its finances for the quarter because of Fisker's bankruptcy proceedings, which ended production of the Ocean at Magna's Graz, Austria, assembly plant. That follows a $261 million impairment charge to account for Fisker's woes in the first quarter.

In a news release, Magna acknowledged increased uncertainty in the unit given Fisker's bankruptcy, the decision by Ineos to not proceed with the Fusilier program in Austria and the planned end of production of the Jaguar E-Pace, Jaguar I-Pace, BMW Z4 and Toyota Supra there.

Magna again reiterated it would look to secure business from Chinese automakers as a way to boost the unit's fortunes.

"While this uncertainty is occurring at a time of vehicle production overcapacity in Europe and China, recent European Union tariffs on imported Chinese-made EVs could create opportunities for contract assembly," the company said.

Magna produced 18,600 vehicles for automakers in the second quarter, nearly a third less than it did a year earlier. The unit recorded sales of $1.2 billion, down 19 percent from the same period a year earlier.

Sales in Magna's body exteriors unit slipped 1.7 percent to $4.5 billion for the quarter. Seating sales were down 9.2 percent, while its power and vision unit recorded a 13 percent gain in revenue.

Magna stock fell 3.7 percent to $41.40 per share in early trading.

Magna ranks No. 3 on the Automotive News list of the world's largest suppliers, with global sales to automakers of $42.8 billion in 2023.