European Car Makers Prep for Uncertainty After Strong Pricing in 1Q -- at a Glance

By David Sachs

Now that the big European car makers have reported first-quarter results, here is a look at how the manufacturers fared and where they expect to go with pricing, a top-of-mind issue in light of unclear economic conditions and fierce competition in China's crowded electric-vehicle market.

--German auto making giant Volkswagen said improved price positioning helped boost its group revenue. However, revenue fell 14.5% in China, where the price war is most acute due to intense competition among battery-electric car makers. Chief Financial Officer Arno Antlitz said pricing will remain strong, but the company sees stiffer competition ahead. "We assume that competition in the international automotive markets will intensify further," Volkswagen said in its earnings report. Average U.S. transaction prices for Volkswagens are expected to have reached $49,000 in April, up 9.8% on the year but down 0.5% month-on-month, RBC Capital Markets analysts said.

--Netherlands-based Stellantis said pricing power contributed to its first-quarter revenue gains and CFO Richard Palmer said this week that pricing is "holding relatively stable compared to the back end of 2022." However, the Jeep, Dodge and Peugeot maker's pricing was 0.8% below the level anticipated by consensus, according to Bernstein. Meanwhile, its inventory is higher than peers' and price could be a lever to pull to get cars to customers with future demand uncertain, RBC said. The analyst pegged Stellantis's average U.S. transaction price at $57,000 in April, up 4.4% annually and 2.1% from March.

--French car maker Renault said revenue grew 30% in the quarter, with robust pricing accounting for nearly a third of the increase. Renault released first-quarter results in April amid Tesla's industry-shaking price cuts, but CFO Thierry Pieton remained resolute on holding prices steady. "The reality is, at the overall group level, the plants are full," Mr. Pieton said. "We are at 100% capacity generally speaking, so there is no big incentive to go cut the prices and kill residuals and go in a spiral that some of the competition is following." Renault's strategy is to use sticker prices to offset costs and currency inflation, while tweaking them with incentives such as financing discounts, it said.

--Premium car manufacturers Mercedes-Benz and BMW appear less vulnerable to price cuts, Bernstein analysts said. Mercedes's average sales price in the cars division rose 6% in the quarter to 76,000 euros ($83,940), a spokesman said, and the company raised its margin target. BMW said it is enjoying strong pricing in the new and used car markets. "However, we do expect the competitive environment and pre-owned car markets to gradually normalize through 2023," CFO Nicolas Peter said. Though uncertainty in China is a factor, BMW has no plans to lower prices there, citing demand evidenced by preliminary April figures, it said.

Write to David Sachs at [e-mail]

(END) Dow Jones Newswires

May 05, 2023 09:29 ET (13:29 GMT)

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