Challenges Loom for European Automakers

According to Fitch Ratings, European car manufacturers are bracing for a difficult year in 2025. The dual pressures of increasing tariffs and stiff competition from Chinese automakers are expected to erode profits. High-end brands such as Porsche and Audi, which export from Germany to the US, are particularly vulnerable.

Financial Strains and Market Pressures

The combination of uncertain tariff policies and soaring raw material costs is set to tighten profit margins further. While some of these costs may be passed on to suppliers, the bulk will likely be absorbed by the automakers themselves. A slight downturn in European sales is anticipated, with restructuring expenses also impacting short-term financial liquidity.

The Chinese Market: A Growing Concern

Chinese competition continues to be a significant challenge, with German and premium brands losing ground to local players. Even in the premium segment, price reductions are becoming more common. Despite an expected uptick in electric vehicle sales in 2025, Fitch forecasts a decline in profitability and free cash flow this year, although overall balance sheets are expected to remain stable.