Auto industry grapples with plummeting EV resale values

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    by zero hedge – May 3, 2024, 2:00 PM CDT

    • European automakers are facing declining demand, especially in China and their domestic markets.
    • Declining resale values ​​and supply issues pose challenges for automakers.
    • The automotive industry faces weak demand, software obsolescence, and price competition, especially in the electric vehicle sector.

    Shares of VW, Mercedes, Stellantis and others fell this week heading into Wednesday trading on news of “lower demand” in Europe.

    In the first quarter of this year, Europe’s top two automakers faced a recession due to weak demand in China and the domestic market. The Financial Times reported on Tuesday of this week.

    The Volkswagen Group has reported a sharp drop in profits by one-fifth year-on-year to 4.6 billion euros, mainly due to a decline in the resale value of the group’s main brand Audi and supply issues. The book says:

    Declining resale values ​​are a particular challenge for automakers like VW, which are heavily involved in customer financing. When used car prices fall below expectations, companies are forced to write down these loans.

    FT also pointed out Stellantis, the parent company of Peugeot and Jeep, said sales fell more than expected in the first quarter, totaling 41.7 billion euros, mainly due to weaker performance in its core European market.

    Similarly, Mercedes-Benz reported a nearly 30% decline in profit before interest and tax to €3.9 billion as both sales volumes and profit margins fell.

    The company also announced that new car sales were down 8% due to the slowdown in Asia. In response to this, City issued a statement this week saying: “Increasingly…” . .Concerned [Mercedes] Operation of automobiles” report notes.

    Meanwhile, Jeffries said the year had gotten off to a “sluggish start” for VW.

    As we have noted at Zero Hedge, the auto industry, previously booming as supply chain disruptions drove up prices, now faces challenges stemming from plummeting resale values ​​for electric vehicles. are doing. The EV industry, especially in China, is winning by downsizing. we pointed out last week.

    Factors for this include weak demand, software obsolescence, and price competition between Tesla and Chinese manufacturers. Additionally, rising interest rates are discouraging consumers from making purchases.

    Volkswagen and Mercedes-Benz are at increased risk of trouble in China, their biggest market, where increasing competition from local companies is slowing consumer demand. VW reported lower-than-expected operating margins due to discounts across models and internal supply chain issues that affected production of Audi V6 and V8 engines.

    Despite the challenges, VW remains focused on transitioning its portfolio with the launch of 30 new models, primarily electric vehicles, the company said. Stellantis also experienced a tumultuous quarter as it prepared to introduce new models later this year, particularly electric vehicles. Net revenue for the first quarter was 41.7 billion euros, down 12% year-on-year, mainly due to lower inventory from a year ago.

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    “This is also a great add-on!”
    “Shares in stocks such as VW, Mercedes and Stellantis fell in the lead-up to Wednesday’s trading this week on news of ‘reduced demand’ in Europe. In the first quarter of this year…”
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