Why the global automotive business model might be dead

The German giant counted on the MEB electric car platform to work across Europe, China and, to a lesser extent, the US across its various brands. 

However, Chinese buyers in particular have shown reluctance to buy Volkswagen EVs without a big discount, cutting the firm's profit in the first nine months of this year by 37% to €1.2 billion. Next year, that profit will fall to €600 million, the bank UBS forecasts.

Meanwhile, the once-popular Skoda brand sold just 14,311 cars in the 10 months to the end of October in China, according to data from bestsellingcarsblog.com, while the budget Jetta brand was down 28% to 91,990 sales.

Stellantis under Tavares has been generous in allowing each of its 14 brands time to prove themselves, despite the seemingly outsized task for the weaker ones, like DS and Maserati, and the potential for overlap.

“A house of brands looks nice, because of volume, but it only works where you have clear brand distinction playing in different segments,” former Nissan executive Andy Palmer told Autocar.

“Each brand has its own marketing and sales costs and inevitably the products get more diverse as each brand tries to assert its own identity.”

Stellantis has also yet to fully streamline its new multi-energy platforms across multiple brands, unlocking those economies of scale.

Meanwhile, the vast and growing gulf between American and European vehicle tastes remains a problem. 

As the three big global markets of the US, Europe and China diverge further and further, one solution for global brands is to work closer with local specialists. 

For example, Ford has taken the Volkswagen Group's MEB platform to build the Explorer and Capri EVs in Europe, while Volkswagen itself is hooking up with Chinese firm Xpeng to use its EV platforms to fast-track new EVs in China, scheduled for 2026. And Audi has gone with MG parent SAIC to kick-start its more localised and techy China offering, previewed by the recent AUDI E electric estate concept.

Like-minded companies are coming together to get around the difficulty of engineering cars for a legislation or market tastes that might be increasingly different from those in your home market.

“Mitsubishi had gone from Europe almost entirely but is returning in a bigger way with Renault,” said Ian Henry, director of AutoAnalysis. “It's possible that more Japanese [firms] could adjust their strategy to Europe by having vehicles made for them under contract.”

This is becoming more pressing with the need to sell a greater number of EVs in Europe – a technology on which Japan is lagging.

The threat of greater US import tariffs under new president Donald Trump is another barrier that will force the minds of car companies used to importing models.

Chinese cars are effectively banned in the US, due to a 100% import tariff and the planned sanction on Chinese-made software and electronic hardware within vehicles. 

However, American car makers’ preferred low-cost base of Mexico is also in the sightlines of Trump’s protectionism, favouring those with factories on US soil but also pushing up car prices even further.

Stock analysts are pretty gloomy about the medium-term future of global car companies, partly due to their exposure to a myriad of global protectionist issues. 

Increasingly car companies are responding by retrenching back to their home market or at least their core regions, especially if the problem market is no longer financially viable.

“The number-one goal is not to inject more capital from the US into China,” GM CFO Paul Jacobson told the UBS conference on 4 December.

Not everyone is suffering. Aside from growing difficulties in China, the global premium brands are likely to ride out the current problems, thanks to higher pricing power and – in the case of BMW, Mercedes-Benz and Volvo – factories in the US.