The recent earnings season in the European motor industry confirms the trend. These are times of suffering, amid self-inflicted troubles from wrong decisions, halted investments, and the need to cut back, as well as Chinese competition that already accounts for around 10% of the market. With declining results, doubts have long been reflected in the stock market with sharp drops. In the year’s balance sheet, only Ferrari survives, overcoming even the controversy of launching its first electric vehicle, the Luce.
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The sector is going against the highs seen in the markets. Investors punish margin reductions due to higher costs and tariffs, which reduce profits; electrification that requires heavy investments not translating into demand; and increased Chinese competition, which steals sales, reviews Josep Bertrán from EAE Business School. In this scenario, only Ferrari has increased profits until June – 1.938 billion (8%) – with higher revenue, and maintains its gross operating margin above an enviable 30%. “The better performance is due to several factors. Price is not a barrier to entry for a customer seeking exclusivity. The increase in costs can be passed on to the sale price without affecting demand. It also has a good financial position, good earnings per share performance, and is not affected by Chinese competition,” explains Bertrán. Its approach closer to luxury benefits it: it is even seen more like Hermès than Volkswagen.
This translates into the stock market, with a 12% improvement in the share price this year. It’s not spectacular, but it helps to stand out. It emerges from the slump left by its first electric vehicle after doubts at launch, with many predicting failure. According to Financial Times, it has already sold the 500 units planned for the year. The brand speaks of a good reception. Partly, customers play with the idea that buying the electric car gives them priority on the waiting list for other more coveted models: while the Luce costs half a million euros, the F80, one of its latest launches, is priced at 3.6 million.
The Chinese export more amid their market’s decline, increased competition pressures the accounts
Apathy rules in the rest of the companies. China hits from two sides. First, through the competition it brings to Europe. After years of price wars, the Chinese market contracts, and Asian brands dump cars they don’t sell at home into Europe. “This accelerated shift will intensify pressure. Unless European authorities raise entry barriers, manufacturers could face several years of sales decline, pushing some into crisis,” warn Bank of America. They will have to lower prices and earn less. On the other side, the Chinese market is a headache for Europeans. The dominance of local brands and the drop in sales especially affect luxury brands like Mercedes, BMW, or Porsche, which lost between 20% and 30% of the market in the region in the first half. Ferrari’s success is not replicable. They also pay for heavy electrification investments that have not translated into sales. On the stock market, BMW falls almost 40%, and Mercedes 25%. Porsche, which falls the least in the stock market (-3%), after adjustments and years suffering the Chinese collapse, recorded fewer sales but more profit in the latest accounts, thanks to a strategy aimed at selling more expensive cars with better margins, like the 911. This could be their recipe. Also cutting: it plans to cut 5,000 jobs. BMW follows with 8,000.
Lucas Pozza, analyst at Scope Ratings, explains that the big risk is not the loss of market share, but that the sales decline reduces “the capacity to absorb fixed costs” and profitability. “Manufacturers have developed their production capacity and organized their investments and labor structure based on higher production volumes.” With fewer sales and price competition, pressure on profit grows, if there is any.
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In the stock market arena, the most bearish is Stellantis, despite returning to profit in the half-year – 670 million – compared to a 2025 of huge losses due to tariffs and restructuring, it disappoints in other items and has the dividend suspended. The owner of Fiat or Peugeot loses half its value this year. The big blow came in February, when it plunged 25% after recognizing charges of 22 billion for the slowdown in electrification. The fall has deepened, pending the effect of Antonio Filosa’s plans to end years of declining results, extensive ranges, and cost reductions, it maintains two souls, one European and one American (Jeep, Dodge…), and today bets on North America, where it achieves better results.
Stellantis is the hardest hit: with one foot in Europe and the other in America, it now grows more on the other side of the pond
Volkswagen, the other giant, loses almost 30%, matching the profit drop in the half-year, to 3.1 billion. Again, it suffers from China, where it loses a third of the market, the US, and lower margins. It has a big question to clear up: the plan for 100,000 layoffs it is considering, which raises doubts about its cost and impact on profit. It will be “painful,” but could make it “more competitive,” believe Bank of America. “All manufacturers face price pressures, margin compression, and greater competition from China, but it is more exposed due to its relatively high costs and worse results in China, on which it heavily depends for revenue and profits,” say Scope Ratings. In Renault’s case, less exposed abroad, it loses 20%. It is experiencing an electric surge that remains to be seen if it translates into profit improvement since they leave less margin.
“Competing only through cost reduction is a lost battle,” warns Bertrán. Regaining market confidence is more linked to better quality-price than the Chinese. Or for the EU to set more tariff barriers, he adds. While Brussels explores whether to tax the rising Chinese hybrids more, the pain continues.
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