VW, Stellantis Launch 55+ Models After Q1 Downturn

Key Takeaway

• Mercedes, Volkswagen, and Stellantis report significant Q1 downturns due to high upgrade costs and weak EV demand in Europe.
• Share prices for major auto manufacturers dropped, with Mercedes experiencing a 3.5% fall, reflecting broader industry challenges.
• In response, VW and Stellantis plan over 55 new models to boost sales and tackle competitive markets like China.

Auto Industry Faces Headwinds

The automotive sector is navigating through a challenging period marked by a significant pullback in the first quarter of the year. Major car manufacturers like Volkswagen, Stellantis, and Mercedes-Benz have reported a slowdown, with Mercedes experiencing a 34% slump in earnings and a notable dip in carmaking returns. This downturn is attributed to high costs associated with model upgrades and a broader market contraction. The industry is also grappling with weak demand for electric vehicles (EVs) in Europe, compounded by the economic pressures of high interest rates and China’s real estate crisis affecting luxury car buyers. John Plassard, a director at Mirabaud & Cie, noted, “The latest car sales are below expectations, and hopes of exponential sales of electric vehicles are dashed.”

Market Response and EV Challenges

The market has reacted to these developments with a decline in share prices for key players. Mercedes shares dropped by as much as 3.5% in early trading in Frankfurt, marking its most significant decrease since October. Similarly, Volkswagen and Stellantis saw their stocks fall, contributing to the SXAP auto index becoming the day's worst-performing subsector. The slowdown in EV sales, particularly in Europe, poses an additional challenge, signaling a potential setback for the region's climate goals. However, Stellantis CFO Natalie Knight remains optimistic, suggesting that the introduction of 25 new models, including the Citroen e-C3, could spur growth.

Strategic Moves and New Models

In response to these challenges, Volkswagen and its brands plan to launch over 30 new models this year, aiming to bolster sales in competitive markets like China, where local EV manufacturers currently lead. Volkswagen has faced parts problems in the US, affecting deliveries of Audis and Porsches. Nonetheless, VW's Audi group, which includes luxury brands Bentley and Lamborghini, is looking to new models like the Q6 e-tron electric SUV to regain momentum. VW CFO Arno Antlitz expressed confidence in a recovery, citing a strong March, a solid order bank, and improving order intake as positive indicators for the second quarter.

Street Views

• John Plassard, Mirabaud & Cie (Neutral on the automotive sector):

  "The latest car sales are below expectations, and hopes of exponential sales of electric vehicles are dashed. Automakers seem to be under a lot of pressure — however, we seem to be approaching the low point of the cycle."

Management Quotes

• Natalie Knight, CFO of Stellantis:

  "Choppy quarters should give way to growth with new vehicles like the Citroen e-C3 fanning sales."

• Arno Antlitz, CFO of Volkswagen:

  "A strong March, the solid order bank and the improving order intake in the past months are encouraging and should already have a positive impact in the second quarter."