Some European automotive stocks reacted positively on Wednesday to US President Donald Trump’s plans to ease pressure on the global car industry, which has been in the front line of the trade war. But this potential uplift to the sector’s share prices was tempered by more disappointing earnings from the region’s key carmakers such as Mercedes-Benz and Volkswagen, following those from Porsche and Volvo on Tuesday.
Under a new executive order signed Tuesday, foreign carmakers will no longer be subject to both the 25% import tax on complete vehicles and the 25% duty on steel or aluminum used in production—only the higher of the two will apply. Automakers that assemble cars in the US will be eligible for partial rebates on import duties—up to 3.75% of a vehicle’s value in the first year, dropping to 2.5% the following year—before being phased out completely by 2027.
Trump also granted the industry a two-year grace period to adjust supply chains and bring more production back to the US, citing the need to reduce reliance on foreign parts. Speaking in Michigan at his 100th day in office, he described the changes as a temporary reprieve: “We just wanted to help them during this little transition.”
Which Stocks Gained and Which Lost?
At midday CET, Italian-listed Stellantis STLAM was up 1.5% and Volvo Car VOLCAR B was up by a similar amount. Volkswagen VOW3 shares were just in negative territory, while Porsche P911 and BMW BMW were down by around 1%. Mercedes-Benz MBG, which released earnings on Wednesday, was one of the biggest fallers in the STOXX Europe 600, losing nearly 2%.
Michael Field, chief European market strategist at Morningstar, says: “Like some recently quoted auto-executives, I find the tariff rebate credit system overly-complex and not at all straightforward to understand.”
“Ultimately the lobbying has worked, and auto companies will see some relief from the still recently imposed 25% vehicle tariff.”
But this is likely to be a temporary reprieve, he adds.
“The benefit fades out in the third year, so the incentive for automakers to source or build parts in the US by that time is clear. What is less clear however is whether it is cost efficient, or even feasible to do so. The most likely scenario is that auto manufacturers will make the right noises re investing in US production, and in the meantime hope and wait that there is a change of heart/priorities by the administration, or even a change of administration by then.”
Thomas Altmann, head of portfolio management at QC Partners, says: “The planned tariff exemptions for carmakers are going down well on the markets. It marks another step back by Donald Trump. The fact that the industry is managing to rein him in—at least to some extent—is a positive signal.”
Trump’s Tariff Exemptions Take Effect
The announcement comes just days before new tariffs on imported car parts were set to take effect, and amid mounting concern in the industry over rising costs and shrinking margins. While some executives welcomed the relief, others pointed to lingering complexity in the tariff framework. Still, automakers including GM, Ford, and Stellantis praised the move as a step toward more investment-friendly conditions.
What to Look For in European Auto Earnings
Mercedes-Benz saw its Q1 net profit drop 43% to EUR 1.73 billion, mainly due to weaker demand in Europe and China, the company reported Wednesday. The operating margin in its core car division fell to 7.3%, down from 9% a year ago. The company also pulled its 2025 profit forecast, citing tariff risks and market uncertainty.
Stellantis’ Q1 revenue fell 14% to EUR 35.8 billion EUR, as global shipments dropped 9%, mainly due to lower production in North America, according to the company report released Wednesday. The company suspended its 2025 outlook amid tariff uncertainty. Growth in South America and new model launches helped offset some of the decline.
Volkswagen‘s Q1 2025 shocked investors Wednesday with a sharp setback in the first quarter: pre-tax profit fell by 40% to EUR 3.1 billion, down from EUR 5.1 billion in the same period last year, driven down by slow China demand.
Volvo Cars saw Q1 operating profit plunge 59% to 1.9 billion SEK, while revenue declined 11.7% to SEK 82.9 billion (EUR 7.56 billion). The EBIT margin fell from 5% to 2.3%, prompting Volvo to withdraw its 2025 and 2026 guidance and announce an SEK 18 billion cost-cutting plan. Shares fell as much as 10% on Tuesday.
Porsche’s Q1 profit dropped 41% to €760 million, with its margin falling to 8.6% due to weak sales in China and the impact of U.S. tariffs, the company reported Tuesday. Revenue slipped slightly to EUR 8.86 billion. Porsche also cut its 2025 outlook and recorded EUR 1.3 billion in one-off charges related to restructuring and changes in its battery strategy.
Renault’s Q1 2025 revenue held steady at EUR 11.68 billion, the company said April 24, with vehicle sales up 2.9% to 565,000 units. The company reaffirmed its margin and cash flow targets.
BMW is set to publish its report on May 7.
Despite the tariff impact in early April, many stocks are still in positive territory so far this year, and have bounced in April.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
