(Bloomberg) -- Stellantis NV shares extended declines after the carmaker warned that slowing demand in Europe will continue to squeeze its margins in the coming months before improving in the second part of the year.

Adjusted operating income margin will likely be 10% to 11% in the first half, Chief Financial Officer Natalie Knight said Tuesday on a call with analysts. That’s below consensus estimates, Citigroup Inc. analyst Harald Hendrikse wrote in a note.

“It’s fair to say that the European marketplace is one of the tougher ones out there and I think winning is about having that right mix of profitability and market share,” Knight said.

The shares slipped as much as 8.3% in Milan trading, extending earlier declines and making Stellantis the third-biggest loser in Europe’s Stoxx 600 Index in afternoon trading.

Stellantis Chief Executive Officer Carlos Tavares already cautioned about a turbulent year ahead with higher labor costs and the end of EV subsisides in many countries. Earlier Tuesday, Volkswagen AG and Mercedes-Benz AG both reported sharply lower earnings on weaker demand and costs related to the introduction of new models. 

Tavares is cutting costs to make Stellantis leaner with a reduced workforce in France, Italy and the US. In Italy — where EV demand has cratered as buyers wait for new subsidies Rome flagged late last year — Tavares has clashed with Prime Minister Giorgia Meloni over deliberations to shift carmaking to cheaper countries.

Beyond the roll-out of new models, the company will focus on cuts to protect margins, the Knight said, citing areas such as R&D, outbound logistics and labor costs as targets for savings.

“We’re going to continue to optimize our labor costs,” she said. “It’s something you know we’ve done consistently through the merger and there will be more opportunities. There are other fixed costs that we’re always running after.”

First-quarter sales slumped 12%, led by declines in the US where the changeover to the revamped Ram 1500 cut into sales though the carmaker forecast new models to drive growth later in the year. 

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Revenue dropped to €41.7 billion ($44.7 billion) in the quarter, below analyst expectations. Strong pricing helped offset some of the drag, Stellantis said, sticking to its annual guidance with the company introducing 25 new models this year.

“One of the things that you see in this environment is, when you look at what’s coming with EVs in the market, quarters will be choppy,” the CFO said earlier Tuesday during a call with reporters. Market share in North America was stable after some declines with strong pricing one of the “real highlights,” she said. 

(Updates with CFO comments beginning in second paragraph.)

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