The electric transition is bending the automotive industry in Europe, with sales increasingly declining

The automotive sector in Europe is in crisis, grappling with the effects of the difficult transition to electric, which for now sees the Chinese brands and the US Tesla clearly ahead in global competition. Despite the duties imposed by the EU on vehicles arriving from Beijing car manufacturers. Over the last two weeks, first BMW, then Volkswagen and today also Stellantis have revised their estimates for 2024 downwards.

So much so that in the last few hours rumors have started to circulate again about the possible merger between Stellantis and Renault, which would create a super group owning around twenty brands, perhaps capable of withstanding the shocks of the market. The present, however, is one of declining sales – in a mix between the cost of the transition, competition from Chinese brands, and changing habits that have led to less use of cars – with the risk of a drop in employment in the supply chain.

The European automotive sector contributes 460 billion euros to the gross domestic product of the Old Continent, and employs 4 million workers. For weeks in Germany the possibility of closing a Volkswagen plant has been discussed, it would be the first time in the almost 90-year history of the German giant, a similar discussion is taking place in Belgium on an Audi site, which is part of the same Group. There is talk of possible cuts that would involve between 15 and 30 thousand workers. Last week Volkswagen lowered its forecasts for deliveries, revenue and operating profit due to the “difficult market environment and developments below initial expectations”.

Stellantis revised its 2024 guidance due to “performance issues in North America” ​​and “deterioration in global industry dynamics”, in a context in which “competitive dynamics have intensified as a result of both increased supply and increased Chinese competition”.

The group expects the adjusted operating profit margin for the current full year to be between 5.5% and 7%, down from the previous ‘double digit’, a reduction due approximately two-thirds to corrective actions in North America, while other factors include lower-than-expected sales in the second half in several regions of the world. The result: today the stock lost 14.72% on Piazza Affari, the worst result in the last two years. The losses drag down the entire sector, with Renault dropping 5.52%.

Things are no better in the luxury sector. Aston Martin fell 25% today on the London Stock Exchange as it no longer expects to achieve positive free cash flow in the first half and is cutting its 2024 wholesale volume target by around 1,000 vehicles to address the issue. Gross profit margins for the year are expected to be “modestly” below 40%, compared to the previous target of around 40%.

The same goes for Mercedes-Benz (-3.2% on the stock market) which lowered its annual profitability target twice during the year, citing an unfavorable economic climate, particularly in China. Slightly different story for BMW which at the beginning of September was forced to reduce its annual targets due to a faulty braking system which led to the recall and interruption of deliveries of 1.5 million vehicles. In 2024, vehicle deliveries are expected to decline “slightly” compared to the previous year, impacting the company’s profitability.