Volkswagen, Mercedes-Benz, and BMW have cut their full-year profitability forecasts, with BMW lowering its outlook for the second time in six months, Seznam Zprávy reported.
The three German automotive groups posted a combined net profit of 5.6 billion euros for the first three quarters of the year, marking a 57 percent decrease from the same period last year.
That drop followed a weak comparative period, according to the Handelsblatt newspaper. A massive 6.4 billion euro write-down by Volkswagen concerning its subsidiary Porsche weighed heavily on the results, though it was a non-cash operation.
European EV demand has surprised automakers. Fully electric vehicles made up 26 percent of total sales at Audi, BMW, and Mercedes in the third quarter, compared to 19.5 percent a year earlier, according to data from Dataforce.
German brands are still unable to manufacture an electric car as efficiently as a combustion-engine vehicle. High battery costs drive down margins, and demand for conventional cars is simultaneously falling in Europe and China.
The market success of our electric cars puts our economic result under even greater pressure,
said Volkswagen Chief Financial Officer Arno Antlitz.
Volkswagen demand for electric vehicles reached levels the leadership expected only by 2029. Mercedes also reported higher electric vehicle sales than predicted, leaving production capacities fully sold out for the year.
BMW plans to end production of some older models early due to strong demand for its new electric generation, which will trigger write-downs and provisions in the fourth quarter. Bank of America automotive analyst Horst Schneider told Handelsblatt that the speed of the transition to electromobility caught German manufacturers off guard.
Volkswagen model ID.Cross profit margins reach only 70 to 80 percent of a comparable combustion-engine vehicle. Volkswagen and Mercedes do not expect manufacturing cost parity between electric and combustion vehicles until the end of the decade.
BMW earnings in the fourth quarter will also absorb provisions for reducing staff in Germany. BMW plans to cut thousands of jobs, with about half of those reductions in Germany.
Mercedes will restart its severance program in December, which will impact its balance sheet next year. Volkswagen faces potential extra costs for severance in 2027 as labor negotiations continue in Wolfsburg regarding an austerity package affecting jobs worldwide and three German plants.
Keep reading