Europe’s inflation crisis is beginning to catch up with car manufacturers. Stellantis on Thursday said consumers in Europe were dialling back car purchases, joining Germany’s BMW in warning the region is on the back foot due to surging costs for anything from energy to lending.
Carmakers long defied economic headwinds thanks to robust demand for their priciest models, with Stellantis – the merged Fiat Chrysler Automobiles/PSA Group – and BMW reporting rising sales and earnings on Thursday, and Mercedes-Benz raising its outlook for the second consecutive quarter last month. Still, economic headwinds are building. Volkswagen last week cut its sales projection for the year, citing scarce semiconductor availability and persisting logistics challenges.
BMW expects strong sales growth in the fourth quarter, but warned rising inflation and interest rates would start to weigh on European demand in particular in the coming months.
Demand in Europe “will level off slightly as some markets experience double-digit inflation rates,” BMW chief financial officer Nicolas Peter said on a call with reporters. The trend is more pronounced in northern European countries than in the south, including France and Italy, where cost increases have been less prevalent.
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He said the economic outlook next year for both the United States and China was better than for Europe, which could help offset the impact of a possible recession in the latter.
BMW’s third-quarter revenue jumped 35.3 per cent to €37.18 billion, beating analysts’ average forecast of €35.32 billion, according to Refinitiv. The Munich-based carmaker made a pretax profit of €4.1 billion, topping the forecast of €3.4 billion, and kept its full-year automotive operating margin guidance of 7-9 per cent.
Revenues at Stellantis rose 29 per cent in the third quarter as improved semiconductor supplies helped to boost sales volumes, the owner of car brands including Fiat and Peugeot said in a statement on Thursday.
Stellantis net revenues amounted to €42.1 billion in the July-September period, topping analyst expectations of €40.9 billion, according to a Reuters poll. Strong pricing and favourable forex also supported revenue growth, the company added.
BMW shares declined as much as 6.5 per cent in Frankfurt, the steepest intraday drop since August, and was 4.9 per cent lower at lunchtime. Stellantis fell as much as 3.2 per cent in Paris, and was 2.6 per cent weaker just after 1pm local time.
So far the auto industry has been shielded from the downturn by pent-up demand as parts shortages and logistics issues continue to weigh on production.
Stellantis’s vehicle inventory has ballooned 54 per cent to 275,000 units since the start of the year – orders that should protect the maker of Ram pickups and Fiat cars in the near term, according to chief financial officer Richard Palmer. Still, the executive said he was “carefully watching how future orders develop”.
“The macro environment is clearly very challenging, particularly in Europe,” Mr Palmer said on a call with reporters. “I wouldn’t be at all surprised if we were to see some demand softening into the middle over next year.”
For BMW’s part, the manufacturer only confirmed its full-year guidance, which may disappoint some investors who were expecting a forecast hike, RBC analyst Tom Narayan said in a note.
As the outlook darkens automakers are under pressure to finance ambitious electric-car roll-out plans. Stellantis is targeting more than 75 fully electric models by 2030 with annual sales of five million vehicles, while maintaining double-digit returns over that time.
BMW sees sales of electric vehicles like its iX3 sport utility vehicle jumping 70 per cent next year after they more than doubled in the first nine months of this year.
Last month the German carmaker said it was investing $1.7 billion to expand its US plant in South Carolina to build six new EV models by the end of this decade for the local market. – Bloomberg/Reuters
