Market Analysis

Volkswagen (ETR:VOWG_p), Mercedes-Benz, and Stellantis (LON:0QXR) all reported lower sales and revenue for the first quarter, attributing the decline to subdued consumer demand for new cars amid persistently high interest rates. This news weighed on their respective stock performances, with Mercedes shares dropping 3.6%, Stellantis nearly 1.5%, and Volkswagen 2.1% in early trading.

Among these automakers, Mercedes suffered the most on Europe's blue-chip euro-zone STOXX50E index, while VW and Stellantis followed suit as significant decliners.

The downturn in car sales affected both mass-market and luxury models, prompting the automakers to maintain pricing stability while promising enhancements as they introduce new models throughout the year.

Harald Wilhelm, CFO of Mercedes-Benz, acknowledged the market weakness and its impact on even their high-end vehicle segment. He emphasized the company's watchfulness regarding global economic and geopolitical conditions.

Despite reporting a 30% decrease in first-quarter earnings, Mercedes vowed to uphold premium pricing for its luxury vehicles despite challenges from model transitions and supply chain disruptions.

Meanwhile, Volkswagen noted a 20% decline in operating profit, and Stellantis reported a 12% drop in revenue for the quarter. However, all three companies reaffirmed their profit or sales targets for 2024 as they anticipate improved performance with the launch of new models.

Legacy automakers in Europe face multifaceted challenges both domestically and internationally. In addition to heightened competition from local manufacturers in China, they are also grappling with the transition to electric vehicles to compete with Tesla and counter the influx of lower-cost electric models from Chinese rivals in Europe.

Following years of constrained supply due to pandemic-related disruptions, these automakers are now contending with consumers facing higher costs and interest rates.

Volkswagen described the first quarter as a "very competitive environment," while Stellantis highlighted the impact of transitioning to its new product lineup and the importance of reducing inventories to maintain pricing strength ahead of key product launches.

Analysts at Jefferies noted that Stellantis' revenue performance in Europe fell below expectations, citing weaker sales volumes and prices. However, they noted that net pricing remained relatively resilient in other regions.

Looking ahead, Volkswagen expects an uptick in orders in the second quarter, driven by the introduction of 30 new models throughout the year, which is anticipated to bolster sales in the coming months.

Paraphrasing text from "Investing" all rights reserved by the original author.