Accelerating Downturn in European Auto Market

Automakers Cut Financial Forecasts

The European auto market is experiencing an accelerated downturn. Major automakers including Volkswagen, Mercedes, Aston Martin, and BMW have all reduced their financial forecasts due to worsening conditions. A memo leaked from a senior executive at Stellantis further emphasized the deepening auto slump. Current data from Bloomberg indicates that the downturn is continuing to worsen.

Decline in New Car Registrations

Recent data from the European Automobile Manufacturers' Association reveals that new car registrations across Europe in September fell 4.2% compared to the same month the previous year, reaching 1.12 million units. This marks the second consecutive month of declines since mid-summer 2022. The data also showed that the increase in electric vehicles was unable to offset the weakness in combustion-engine models.

European Auto Market in Crisis Mode

Constantin Gall, the managing partner at EY for Western European markets, stated in a note to clients that the European auto market "remains in crisis mode." He added that there is no positive momentum towards the end of the year, with a weakening economy and significant geopolitical tensions causing uncertainty among both private and commercial customers.

Consumers Gravitate Towards Affordable EVs

European consumers were hesitant to purchase expensive electric vehicles (EVs) in September, instead opting for more affordable options. Sales of EVs rebounded in September, a positive sign for an industry that has seen a decline in demand for fully electric cars after government subsidies were withdrawn last year. EV deliveries increased by 24% in the UK, where automakers are significantly discounting prices to comply with the government's zero-emissions vehicle sales mandate. In Germany, where the possibility of new incentives is being discussed, EV sales rose by 8.7%.

Performance of Automakers in September

Stellantis experienced the most significant decline in new car sales in September, with a drop of about 26%. The MSCI Europe Automobiles and Components Index has attempted to reach new all-time highs four times in the last decade but has failed three times, with the most recent attempt in April. So far this year, the index has declined by approximately 10%. The MSCI World Automobiles Index also indicates that global automakers are facing pressure.

Challenges for Auto Companies

Auto companies are expected to continue facing numerous challenges leading up to 2025. Interest rates remain high, and vehicle prices are elevated, resulting in some of the worst affordability for consumers in a generation. This issue is also prevalent in the US.

Bottom Line

The European auto market is in a state of crisis, with major automakers cutting financial forecasts and new car registrations declining. Despite a rebound in EV sales, the industry continues to face significant challenges, including high interest rates and elevated vehicle prices. This situation raises critical questions about the future of the auto industry. What are your thoughts on this issue? Feel free to share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.