As tariff tensions intensify, margins for electric cars are eroding, and global competition is increasing, automakers around the world have lowered their profit projections.
Companies from Volkswagen, Mercedes-Benz, Stellantis, and Aston Martin to Stellantis, and Aston Martin warn that the US Trade Policy under Donald Trump is making it more difficult for companies to plan their financial future. This policy, coupled with increasing production costs, and changing consumer demands, are making this increasingly challenging.
Volkswagen reduces profit forecast due to EV switch and trade tensions
Volkswagen, a German automaker, said Wednesday that it expected its annual operating profits to be at the lower end of their previous estimates.
The second largest automaker in the world now anticipates a full-year return on its sales of closer to 5%. This is down from previous projections.
The net cash flow forecast is EUR34 billion (US$38.7 billion), which falls at the low end of EUR2 to EUR5 billion.
Volkswagen’s earnings for the first quarter of 2018 dropped 40% as margins suffered from the ongoing shift to battery-electric cars (BEVs), which are significantly less profitably produced than combustion-engine vehicles.
The company reported that “Battery electric vehicle sales in Europe more than doubled during the first quarter. However, this was at the expense of lower margins.”
Arno Antilitz, Chief Financial Officer of the company, acknowledged that there were challenges. He said: “We must ensure a cost-competitive structure along with our strong vehicle offering to remain successful in an ever-changing world.”
Mercedes-Benz has withdrawn its full-year forecast
Mercedes-Benz echoed Volkswagen by pulling its annual earnings forecast, citing the “current volatility”, a result of President Donald Trump’s new tariffs against imported cars.
German luxury automaker, BMW reported that group earnings before taxes and interest (EBIT), which are based on the company’s total revenue of EUR2.3 billion for the first quarter, had fallen by 41%.
Sales of cars and vans fell by 7% in Europe, and 10% in China. The US market was the only one to show resilience with a sales increase of 1%.
The profit margin of its car division fell to 7.3%, from 9% one year ago.
Mercedes stated in a press release that “the current volatility regarding tariff policies, mitigating measures, and the potential direct and indirect impacts on customer behaviour is too high for assessing the business growth of the rest of the year.”
The company has warned that its profit would “negatively be impacted” if tariffs are maintained.
The carmaker informed analysts that it was stockpiling in-stocks to protect against possible tariff shocks.
Mercedes CFO said that an additional impact of tariffs in 2025 may reduce margins on cars by as much as 300 basis points.
Stellantis cancels its recovery forecast after sharp drop in profit
Stellantis, the maker of Jeeps and Peugeots, suspended on Wednesday its forecast for a modest recovery in this year, after suffering a drop of 64% in operating profit adjusted in 2024.
The first-quarter revenue declined by 14% on an annual basis to EUR35.8 Billion ($40.7 Billion), in line with the market’s expectations.
According to the carmaker, it is too uncertain for them to continue with their previous projections due to changing US tariff policies.
Stellantis reported that it had burned through over EUR6 billion of cash in the past year. This raised concerns regarding its financial stability in an extended trade dispute.
Volvo Cars pulls back forecast; Aston Martin limits exports to US
Volvo Cars retracted its forecast of earnings for the two-year period on Tuesday, citing also the unpredictability of the US Tariff regime.
Meanwhile, British luxury carmaker Aston Martin reported a narrower-than-expected loss in the first quarter and said it would limit vehicle exports to the US to mitigate the effects of the new 25% tariffs on imported cars and parts.
For the quarter ended March 31, the company reported a pretax adjusted loss of PS79.8 (106.8 millions) which was lower than analyst’s expectations, and also significantly less than its PS110.5 loss from a year earlier.
Aston Martin acknowledges that while the luxury segment does have some price power, tariff disruption is still a major headwind.
Trump reduces auto tariffs to encourage domestic production
On Tuesday, Donald Trump signed an executive order that eased some of the 25% tariffs he had previously placed on autos and parts.
Trump said to reporters that he did not want to punish manufacturers, but rather help them through this short-term transition.
According to Treasury Secretary Scott Bessent the move is intended to allow carmakers to increase domestic production.
Bessent, during a White House press briefing said that “President Trump had met with domestic and foreign car producers and is committed to bringing auto production back to the US.”
We want to provide the automakers with a way to achieve this quickly and efficiently, while creating as many jobs possible.
The executive order amending the auto tariffs of 25% provides limited relief to US assembled vehicles incorporating foreign parts.
The new policy will provide eligible vehicles with a rebate of 3.75% on the sales price of their vehicle, which reflects the estimated burden of tariffs on parts made abroad, accounting for 15% of this cost.
The rebate for the second year will be reduced to 2,5% in line with the lower share of imported parts.
Unnamed senior Commerce Department officials said that carmakers had asked the government for additional time to build new factories and adjust their supply chains.
The AP reported that the official stated manufacturers will announce additional plans for factory expansion, new hires and shift changes in the next few weeks.
The post Global automakers reduce forecasts due to Trump tariffs, EV cost squeezes margins could be updated as new developments unfold.
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