By Nick Carey

LONDON (Reuters) -European carmaker Stellantis on Monday joined bigger rival Volkswagen and others in warning about the worsening outlook for auto demand and rising costs, wiping billions of euros off the sector's market value.

The companies are struggling with weak demand in China and the United States and a potential trade war between Beijing and the European Union as the EU prepares to finalise import tariffs on Chinese electric vehicles, imposed over alleged subsidies.

British luxury carmaker Aston Martin also partly blamed falling demand in China for a full-year profit warning on Monday, as did Mercedes-Benz and BMW earlier this month.

Aston Martin's shares plunged as much as 28% to their lowest in nearly two years.

Shares in Stellantis, long popular with investors but now seen as acting too slowly to address problems in the U.S. market, fell nearly 15% and hit their lowest since December 2022. Stellantis shares have lost 38% in value this year, making it Europe's worst performing automaker.

The latest warnings follow Volkswagen's announcement late on Friday that it was cutting its 2024 profit outlook for the second time in under three months. Its shares were down a little over 2.8% in mid-morning trading on Monday.

The German car giants have been reliant on China for around a third of their sales and have been hit by the weaker economy there, fiercer competition from domestic Chinese automakers and a vicious price war in the electric vehicles (EV) market.

"MANAGEMENT'S CONSPICUOUS ABSENCE"

Falling European demand has not helped. New car sales in the EU fell 18.3% in August to their lowest in three years with double-digit losses in major markets Germany, France and Italy and sliding EV sales.

But many of Stellantis' problems stem from North America.

The expensive Jeeps and pickup trucks it sells in the U.S. market have generated virtually all its profits since the automaker was formed by the 2021 merger of FCA and PSA, and have made its profit margins the envy of its mainstream peers.

But high inventories and weak sales as Stellantis has somehow misjudged its cash cow market has forced it to cut production while also offering deep discounts on the vehicles depreciating on dealer lots across America.

As a consequence Stellantis has slashed its adjusted profit margin for the year to between 5.5% and 7%, down from double digits, and warned of negative cash flow of between 5 billion euros ($5.6 billion) and 10 billion euros.

In a client note after Stellantis' investor relations team held a conference call with investors, Bernstein analysts wrote that the company had been slow to address concerns over the size of its U.S. inventories.