Kana Inagaki reports that European carmakers face grim auto earnings as they struggle with intense competition from Chinese rivals offering more affordable electric vehicles and hybrids with advanced software technologies. While EV sales across Europe have surged, this is not necessarily good news for profits in the western automotive industry, at least for now. Volkswagen’s sales of electric cars in Europe jumped 29 per cent year-on-year, boosted by government subsidies for EV purchases in Germany and a surge in fuel prices caused by the war in Iran.
As a result, EVs account for about 40 per cent of its order book. The boom in EV sales contrasts sharply with last year when carmakers from Honda to Porsche and Stellantis watered down their electric car ambitions. The issue for Volkswagen and other western carmakers is that electric cars still make less money than combustion engine models owing to the higher cost of batteries.
All three of Germany’s biggest carmakers, including Mercedes-Benz and BMW, are forecasting far smaller profits for 2026 following a series of profit warnings, while Volkswagen yesterday reported an operating loss of €5.9bn for the third quarter. Germany and France recently reached a deal on European car policy that would allow carmakers to sell small volumes of petrol vehicles beyond 2035 if their proposal were more widely accepted across the bloc. Climate groups warned that it would threaten investments in critical infrastructure at a time when EV sales have finally started to take off.
For Volkswagen, Arno Antlitz said the challenge was to forecast how much of the current EV demand would be sustainable when fuel prices eventually fall. Regardless of fuel prices, Volkswagen’s EVs still have to reach cost and margin parity with petrol counterparts by 2030 because there is no sign that Chinese rivals will slow their global EV charge.
Source: Financial Times Companies · Summarized by HeadlinesBriefing