{"id":47160,"date":"2023-08-11T07:48:37","date_gmt":"2023-08-11T11:48:37","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/europes-auto-manufacturers-braced-for-challenging-2nd-half\/"},"modified":"2023-08-11T07:48:44","modified_gmt":"2023-08-11T11:48:44","slug":"europes-auto-manufacturers-braced-for-challenging-2nd-half","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=47160","title":{"rendered":"Europe\u2019s Auto Manufacturers Braced For Challenging 2nd Half"},"content":{"rendered":"<div>\n<p>Most European auto manufacturers reported impressive profits for the first half but the biggest economy Germany\u2019s flirtation with recession is spooking potential buyers and prospects for the second half don\u2019t bode well for investors.<\/p>\n<p>The IMF has just adjusted its forecast for Germany\u2019s real GDP \u201cgrowth\u201d in 2023 to minus 0.3% from a previous prediction of minus 0.1%.<\/p>\n<p>According to the IFO Institute, German automakers view current business conditions as worse than the previous month&#8217;s.<\/p>\n<p>\u201cOrders are currently slow for automakers and their suppliers and in light of persistent uncertainty in the global markets, the automotive industry\u2019s expectations for the coming months also remain at a low level,\u201d IFO analyst Anita Woelfl said.<\/p>\n<p>First-half financial results showed mass market players like Renault and Stellantis did well, while Volkswagen struggled, with its electric models worryingly so. Ferrari again starred in the luxury sector, surprising nobody, but even Aston Martin turned heads with a performance suggesting its struggles may be ending.<\/p>\n<p><fbs-ad position=\"inread\" progressive=\"\" ad-id=\"article-0-inread\" aria-hidden=\"true\" role=\"presentation\"><\/fbs-ad><\/p>\n<p>Meanwhile, Tesla\u2019s aggressive price-cutting for its battery-electric vehicles has spilled over into the overall market, according to Steve Young, managing director of British-based automotive retailing consultancy ICDP.<\/p>\n<p>Bernstein Research said financial reports for the first half of 2023 show orders are now softening, pushing economic and pricing concerns to the forefront.<\/p>\n<p>\u201cLooking into the second half, only Ferrari may have the chance to raise (profit) guidance again and Volkswagen may need to adjust guidance downward,\u201d Bernstein said in a report.<\/p>\n<p>\u201cRenault will continue on its model cycle, while Stellantis may face tougher UAW negotiations (in the U.S.). In the premium space, BMW&#8217;s model cycle may warrant a closer look as maintaining earnings levels at Mercedes will be challenging enough into 2024,\u201d the report said.<\/p>\n<p>While the German premium manufacturers look strong, prospects are mixed for the mass market players.<\/p>\n<p>\u201cRenault and Stellantis (are) doing well, while Volkswagen is struggling with worse pricing and BEV margins. There are worries in Europe over how much the Chinese (manufacturers) and Tesla will ruin the party, which makes us less optimistic on the medium term, 2025 to 2027,\u201d according to the report.<\/p>\n<p>\u201cVolkswagen on the other hand pushed out volumes with a recovering supply chain but squandered their operating leverage. They have taken down volume guidance, seen worsening pricing and worsening BEV margins,\u201d Bernstein said.<\/p>\n<p>The luxury sector is doing well, even including perennial struggler Aston Martin.<\/p>\n<p>\u201cFerrari is the only (manufacturer) that qualifies to be looked on as a luxury stock with 30% ROIC (return on invested capital), and the Purosangue is sold out until 2026. Aston Martin is seeing strong demand, building their order books while increasing pricing. But it is a very different story to Ferrari. Aston is coming from a bad place, working towards cash flow break-even, so that they can build their luxury credentials over the next decade. There is a lot of risk to that, but if everything goes right it could look like Ferrari within a decade,\u201d according to the report.<\/p>\n<p>ICDP&#8217;s Young said retail demand for EVs seems weak, aggravated by the residual values uncertainty caused by Tesla\u2019s price cuts.<\/p>\n<p>\u201cIn Europe, VW and others have resisted cutting prices to align with Tesla, but consequently face demand challenges, leading to some downtime being taken at the Emden plant that produces the ID range in Germany,\u201d Young said.<\/p>\n<p>The conditions in European car markets are confusing buyer\u2019s. Base prices seem out of reach, while headlines suggest big price cuts.<\/p>\n<p>\u201c(This) creates an atmosphere of uncertainty and doubt, in which case, the easiest response is delay and defer. That will only add to the demand slowdown, creating a vicious circle that adds fuel to the fire,\u201d Young said.<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.forbes.com\/sites\/neilwinton\/2023\/08\/11\/europes-auto-manufacturers-braced-for-challenging-2nd-half\/\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Most European auto manufacturers reported impressive profits for the first half but the biggest economy Germany\u2019s flirtation with recession is spooking potential buyers and prospects for the second half don\u2019t bode well for investors. The IMF has just adjusted its forecast for Germany\u2019s real GDP \u201cgrowth\u201d in 2023 to minus 0.3% from a previous prediction [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":47161,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-47160","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-featured"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Europe\u2019s Auto Manufacturers Braced For Challenging 2nd Half | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Most European auto manufacturers reported impressive profits for the first half but the biggest economy Germany\u2019s flirtation with recession is spooking\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, 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