The European automotive sector continues to slow down. This Thursday, the Volkswagen group reported that its profits for the first nine months of the year fell by more than 50%, totaling around 3.5 billion euros.
In the third quarter of this year, the second largest car manufacturer in the world reported losses of 482 million euros, a clearly negative figure if we compare it to the same period last year, when the Volkswagen Group posted a profit of around 1.2 billion euros.
Sales, in turn, increased in South America (13%), Western Europe (4%) and Central and Eastern Europe (11%). This performance ended up compensating for the drop in the Chinese and North American markets.
Semiconductor crisis penalizes sector
There are several reasons that explain the German group’s slowdown. Volkswagen has been facing the effects of an increasingly unstable supply chain. The most recent case involves Nexperia, a Dutch semiconductor manufacturer controlled by Chinese capital, which has become the center of a political dispute between Europe and China.
Li Yang/China News Service/VCG/Getty Images
The government of the Netherlands took control of the company for national security reasons, fearing the transfer of technology to the Asian country. In response, Beijing suspended exports of chips produced by Nexperia, putting the supply of essential components to the European automotive industry at risk.
Although Nexperia is not a direct supplier to Volkswagen, many of the group’s partners depend on its products, making the impact inevitable. Volkswagen’s chief financial officer, Arno Antlitz, acknowledged that the solution is “political and not technical”, a reading shared by Mercedes-Benz leader Ola Källenius, who faces similar problems.
Pedro Nunes
Added to this are the costs of Porsche’s change in strategy, which decided to maintain the production of models with combustion engines, countering the electrification trend and forcing Volkswagen to adjust its product strategy, a charge that cost 4.7 billion euros.
Trump tariffs begin to weigh on Europe
Volkswagen Group’s operating profit fell by almost 60% to 5.4 billion euros. The profit margin fell to less than half, as the tariffs imposed by the then US president, Donald Trump, made both exports and imported parts more expensive. According to Volkswagen, the North American tariff increase had an impact of 7.5 billion euros on the company’s accounts.
The same scenario affected Mercedes-Benz, which also saw its profits shrink in the third quarter, penalized by the increase in tariffs on shipments to the United States. The German manufacturer recorded a 31% drop in profit, to 1.19 billion euros, compared to 1.71 billion the previous year, while revenues fell 7%, to 32.15 billion euros.
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