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HomeEurope’s Car Makers Lean on U.S., China as They Brace for Recession

Europe’s Car Makers Lean on U.S., China as They Brace for Recession


BERLIN—European auto makers are looking to the U.S. and China for shelter from the economic storm they say is coming as the war in Ukraine drags on and signs of a looming recession gather in Europe.

In a closely watched survey published on Thursday by the Munich-based Ifo Institute, German auto makers and suppliers said they were losing confidence in the European economy. The survey showed a key confidence index for the industry falling sharply in October.

“Slumping demand and rising material and production costs worsen the earnings situation, even with increased sales and prices,” Oliver Falck, head of the Ifo Center for Industrial Organization and New Technologies, said.

Overall, auto earnings in the three months to the end of September held up well, largely meeting analyst expectations, as many auto makers were able to offset falling unit sales and rising costs with higher prices at dealerships.

But a lot of the good news in the third-quarter reports wasn’t coming from Europe.

Bayerische Motoren Werke AG

BMW -5.37%

, the Munich-based luxury car manufacturer, reported an 8.5% increase in net earnings in the third quarter to 2.8 billion euros, equivalent to $2.75 billion, citing extraordinary gains in China and higher pricing as big drivers of earnings.

As the European Union and the U.S. debate how to reduce their economic dependence on China, German auto makers say they are determined to defend their business there. BMW Chief Executive

Oliver Zipse

skipped Thursday’s earnings call to join German Chancellor

Olaf Scholz

on a diplomatic visit to Beijing.

Volkswagen AG’s

VOW -2.68%

new CEO,

Oliver Blume,

was also attending.

“China is not a risk, but rather an opportunity,” BMW’s chief financial officer

Nicolas Peter

said on Thursday.

BMW’s new car sales overall totaled 587,744 vehicles, down 0.9% from a year ago, dragged down by a 11% drop in Europe. U.S. sales were up 4% and China sales rose 5.7%.

“For the year 2023, the forecasts are increasing that Germany and parts of Europe will go into recession. The U.S. and China will probably develop somewhat better,” Mr. Peter said.


STLA -3.66%

NV, an auto conglomerate that includes French brands Peugeot and Citroën as well as U.S. brands such as Chrysler, Jeep, Dodge and Ram, reported higher sales and earnings in the third quarter, with deliveries to customers improving as a global semiconductor shortage continues to ease. Stellantis confirmed its targets for the full year.

Supply chain woes, parts shortages and inflation is making it costlier for auto makers like Ford to manufacture vehicles. Is this trend here to stay, and does this mean that cars are going to be more expensive? WSJ’s George Downs explains. Illustration: George Downs

Auto analysts at


said in a note to clients that Stellantis benefited from its U.S. business, where brands such as Jeep, Ram, Dodge and Chrysler, saying North America was the “main contributor” in solid pricing that contributed to profit.

Auto makers have also been trying to compensate for the squeeze on supplies of new cars caused by supply-chain disruptions by raising prices, flattering earnings and sales in the third quarter despite a drop in the number of vehicles sold overall.

Mercedes-Benz Group AG, the Stuttgart, Germany-based luxury car maker, has taken its entire model lineup upscale to maximize profit. Mercedes reported on Oct. 26 that net profit in the third quarter rose to €3.92 billion from €1.87 billion a year earlier, as its return on sales surged to 14.5% from 8.8%, largely the result of better pricing.

Analysts at Bernstein Research said they thought Mercedes was better protected from a coming economic downturn as a result of its strategy to go upscale.

“The company’s increasing pricing power and effective cost restructuring will keep it in double-digit territory despite mounting headwinds for 2023,” Bernstein analysts said. “We expect Mercedes to stay true to its premiumization strategy when things go south.”

The same strategy doesn’t appear to be helping

Aston Martin Lagonda Global Holdings

AML 5.40%

PLC, maker of the iconic sports car used in the James Bond movie franchise. The U.K. luxury car stood out this week when it posted a pretax loss for the third quarter of 225.9 million pounds, equivalent to $257.3 million, compared with a loss of £97.9 million a year earlier. The company lowered its guidance for the full year, with wholesales growth now seen at 6,200-6,600 units, from 6,600 units previously.

Write to William Boston at [email protected]

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