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Europe's automakers off to a weak start for 2024, with EV sales a problem for some

By Barbara Kollmeyer

Stellantis, Volkswagen and Mercedes shares fall on disappointing results

Shares of three of Europe's biggest automakers were dropping on Tuesday after respective results that broadly showed a slow start to 2024, with sales slow for newer models and electric vehicles for some.

Leading the way south, shares of Mercedes-Benz Group AG (XE:MBG) fell 3.6% in European trading, with Volkswagen AG (XE:VOW) (XE:VOW3) and Stellantis NV (STLA) (IT:STLAM) each down 1.8%.

Mercedes reported a 25% drop in first-quarter net profit to EUR3.025 billion ($3.25 billion), with adjusted earnings down 34% and revenue off 4% to EUR35.87 billion. Alongside lower car sales and supply-chain bottlenecks, the automaker reported weakness for electric vehicles, with unit sales of those car sales down 2% and vans off 17%.

Admitting to a "muted start as expected," Volkswagen's first-quarter operating profit dropped around 20% to EUR4.58 billion, with the German automaker blaming a 2% drop in vehicle sales volumes, "unfavorable country, brand and model mix," as well as higher fixed costs. Revenue slipped 1% to EUR75.5 billion for the automaker that plans to launch 30 new models this year.

Multinational automaker Stellantis reported a 12% drop in revenue to EUR41.7 billion, missing forecasts and hurt by weaker sales in North America - down 15% as shipments fell 20%. Weak sales were blamed on the introduction of new models such as the Ram 1500 and next generation Dodge Charger, though growth in Stellantis' Jeep Wagoneer partially offset that.

Stellantis also saw shipments and sales in China, India and Asia Pacific drop 46%, citing "challenging market and economic conditions and increasing competition."

Shares of all three automakers are down for the year, with Stellantis down 13%, and Volkswagen and Mercedes off 2.5% and 3.7%. Tuesday's results were prefaced by Porsche AG (XE:P911), which last week reported a drop in revenue and profit in the first quarter, on higher costs of ramping up new models.

Still Volkswagen remained upbeat on its 2024 outlook, while Stellantis also reiterated its guidance for double-digit adjusted operating income margin in 2024, and Mercedes also confirmed guidance.

Free cash flow, an important metric for automakers, was particularly worrying at Volkswagen, where the company reported EUR3 billion in negative cash flow in its automotive division, noted Jefferies analyst Philippe Houchois, who has a buy rating on the car group. The pace of that reversal could take several quarters, he said.

A team of analysts at Citigroup led by Harald Hendrikse flagged particular worries at Mercedes, one of Europe's biggest luxury automakers. "Although Q1 is expected to be trough - impacted by model changeovers and supply constraints - we worry that overall demand conditions, especially in China remain challenging," they said.

And weakness continued for Mercedes Mobility unit, which deals with financing, leasing, car subscription and car rental, due to "higher U.S. credit losses and higher interest rates," said Hendrikse and the team, who rate the automaker neutral.

A positive for the Mercedes? It reported EUR2.2 billion free cash flow that "remains the key support for the shares," they said.

Taking a top down view of automakers late last month, a team of Citi analyst led by Itay Michaeli in a separate note last late month that while consensus sees continued global auto volume recovery in 2024, they see they now expect flat volume for Europe this year.

"Remember that 2023 benefited from easy comparables, deferred demand, strong starting backlogs (which have now mostly normalized), and from the potential of a dealer inventory rebuild," said the analysts.

-Barbara Kollmeyer

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.


(END) Dow Jones Newswires

04-30-24 0623ET

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