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Europe’s two largest automakers suffered a decline in the first three months of this year as the industry was hit by lower demand in China and domestically.
At Volkswagen, consolidated profit fell by a fifth to 4.6 billion euros in the three months to March 31 compared to the same period last year, which is mainly due to falling resale values and delivery problems at Audi, one of the most profitable brands.
Lower resale values are a problem for auto companies like VW, which provide the bulk of customer financing. When used cars sell for less than expected, they are forced to take write-downs on these loans.
Stellantis, which owns Peugeot and Jeep, posted a bigger-than-expected decline in first-quarter revenue to 41.7 billion euros, reflecting weaker performance in its core European markets.
Daimler Group Mercedes-Benz, which also reported results on Tuesday, saw its earnings before interest and taxes fall by almost 30 percent to 3.9 billion euros as both sales volumes and margins fell.
Mercedes-Benz said new car sales fell 8 percent year-on-year to 463,000, led by declines in Asia. Analysts at Citi said this was “increasingly…” the case. . . worried about the [Mercedes] Cars Operations,” citing weaker demand for luxury products and from Chinese consumers.
Jefferies analyst Philippe Houchois wrote that it was a “bad start” to the year for VW.
After several years in which profits rose due to supply chain problems that drove up prices, the industry is facing problems caused by a collapse in the resale value of electric vehicles – due to weaker-than-expected demand, problems such as outdated software and a Tesla and China price war fueled by it – and higher interest rates that have deterred consumers.
VW and Mercedes are also facing greater problems in their biggest market, China, where consumer demand has weakened and competition from domestic carmakers is becoming increasingly fierce.
VW reported a lower operating margin than expected due to markdowns across all models and internal supply chain issues that slowed production of Audi’s V6 and V8 engines.
The group had warned of a “slow start to the year” as it prepares to reduce production of older models and focus on 30 new models across its brands, almost all electric vehicles.
The company reiterated its full-year forecast of “growth of up to 5 percent” on sales of 322.3 billion euros in 2023, with CFO Arno Antlitz highlighting cost-saving measures and the introduction of the new models.
Stellantis chief financial officer Natalie Knight said the quarter was “unsettled” as it prepares to launch new models, particularly electric cars, later in the year. Net sales were 41.7 billion euros in the three months to March, down 12 percent from a year earlier, after the company reduced inventory built up last year. This compares to average analyst expectations of 42.3 billion euros, according to a Refinitiv survey.
Shares in VW and Mercedes lost around 3 percent in morning trading. Stellantis fell about 2 percent.