Western / Legacy & Pure-play OEMs

Volkswagen has dramatically cut its 2026 profit outlook, now expecting an operating margin of no more than 1% this year, down from its previous forecast of at least 4%. The German carmaker expects around €10 billion, or $11.5 billion, in charges this year, including restructuring costs tied to workforce reductions and writedowns on Chinese assets; that total includes a €6-billion writedown related to Porsche, reflecting revised long-term expectations for the sports-car maker. Excluding the exceptional charges, Volkswagen said its operating margin would be around 4%. Volkswagen shares fell more than 7% following the announcement, dragging other automakers lower. Chief Financial Officer Arno Antlitz said the Chinese market has contracted by around 20%, with no stabilization currently in sight, while Chinese automakers take domestic share and expand into Europe with competitively priced electric vehicles. Volkswagen also said growing EV sales are weighing on profitability at its Volkswagen passenger-car and Audi businesses, and it recently reached an agreement with labor representatives that could increase planned job cuts to 100,000 globally.

The premiers of Germany's Baden-Württemberg, Bavaria, and Lower Saxony states on the 17th called on government and European Union leaders to accelerate support measures, saying the auto industry faces "historic turmoil." The three states issued an eight-page joint statement, warning that without improvements to the domestic regulatory environment and trade protection measures, "the automotive industry could suffer irreversible damage." The statement said the EU's anti-subsidy investigation should be extended to plug-in hybrid vehicles, and that an industrial acceleration law to support industrial investment, decarbonization, and regional manufacturing must be advanced urgently and steadily. It also called for measures to lower energy costs and non-wage labor costs, boost infrastructure investment, and curb bureaucracy, and said EU carbon emission regulations should be relaxed, arguing that relief measures are needed for synthetic fuels, hybrid vehicles, and high-efficiency internal combustion engines as transition-period technologies.

Chinese automakers are scouting locations for production bases in Europe after the EU signaled it will introduce local content requirements. Alfredo Altavilla, BYD's adviser for Europe, told Reuters at the opening ceremony of a Denza premium brand dealership in Turin, Italy, that companies are focusing their efforts on inspecting existing auto assembly plants, which can start production faster than building factories from scratch. The European Commission is drafting a "Made in Europe" policy that favors industrial parts and products made within the bloc, and is expected to set minimum local content thresholds for EVs sold in the region, possibly as early as next year. BYD aims to acquire existing plants, take full ownership and then retrofit them; its first European passenger car plant in Hungary is in the early stages of production, and the company is expected to select a second European site within the year. Altavilla said that to grow while meeting EU regulations, BYD will eventually need "three assembly plants and one battery plant" in Europe, adding that Spain and France offer "clearly simpler situations" and are the "most feasible" options. Italy is a "second-best" choice because Stellantis is reluctant to sell plants, he said. Chinese manufacturers have already begun partnerships to share production lines at underutilized European plants: Leapmotor is teaming up with Stellantis in Spain, Dongfeng Motor with Stellantis in France, Geely with Ford Motor in Spain, and Chery has bought a plant in Spain previously owned by Nissan.

Polestar Automotive Holding UK PLC cut its full-year 2026 delivery forecast, citing the fallout from being barred from selling its newer vehicles in the United States. The Swedish, Geely-backed automaker now expects annual volume growth of low-to-mid single digits, down from a previous forecast of low double digits, implying full-year deliveries of roughly 61,900 to 63,100 vehicles. In June, Polestar became the first automaker forced out of the U.S. market after the Commerce Department denied it authorization to sell model year 2027 and later vehicles under a rule restricting Chinese-controlled vehicle software and data systems, and shares fell as much as 16% on the news. Second-quarter revenue fell 8% year over year to $727 million, missing estimates, while the company recorded about $130 million in U.S. restructuring charges tied to inventory, residual value guarantees, and employee and supplier provisions. Net loss narrowed 55.3% to $459 million, though first-half free cash flow worsened to negative $1.06 billion from negative $787 million a year earlier despite Polestar raising $700 million in fresh equity, and the company also opened its order book for the new SUV 4, the first of several refreshed models planned over the next few years.

South Korea's Ministry of Trade, Industry and Energy announced that the country's automobile exports in August fell 29.8% year on year to 3.85 billion US dollars, hit by a reduced number of working days during the summer holiday period and strike action by workers at some automakers. Exports to North America and the European Union plunged 28.2% and 16.8% respectively, while exports to Asia and the Middle East tumbled 41.9% and 23.6%. Total vehicle exports in August came to 146,499 units, down 26.9% year on year. Auto parts exports fell 9.8% to 1.50 billion US dollars, and the number of vehicles produced by domestic plants dropped 35.8% to 206,064 units last month. Domestic vehicle sales, covering both locally made and imported cars, stood at 109,920 units in August, down 20.8% from the same period a year earlier. The ministry noted, however, that despite the overall slump, exports of eco-friendly vehicles remained resilient, a category that includes electric vehicles, fuel-cell electric vehicles, hybrids and plug-in hybrids.

General Motors is warning investors to expect a softer fourth quarter as the changeover to its next-generation pickups temporarily cuts truck deliveries by roughly 35,000 units, while management also sees 2027 as a difficult year for electric vehicles. CFO Paul Jacobson said at Morgan Stanley's Laguna Conference that the truck shortfall is about the right way to think about the fourth quarter, which is typically seasonally weaker than the second and third quarters. The near-term weakness looks largely operational, but the bigger investor issue is whether GM can protect truck profits while making its EV business sustainably profitable. Pickups and SUVs remain critical profit engines for GM's North American business, which in the second quarter generated $48 billion of revenue and $3.9 billion of adjusted EBIT at an 8.6% adjusted EBIT margin, and GM raised its full-year 2026 guidance for the second time this year. Jacobson said 2027 is going to be a bit of a flat spot for EVs as profitability remains under pressure, hit first by tariffs and second by the loss of EV credits in the variable profit equation, though GM still believes EVs are a long-term opportunity. GM's next major checkpoint comes October 20, when it reports third-quarter results, with investors watching updated 2026 guidance, North American margins, truck inventories and progress reducing EV losses.

Automotive analyst John Murphy has predicted hybrids will account for 34% of the U.S. market by 2030, up from just over 18% in 2026, a shift that could redirect investor attention from speculative EV startups to established automakers and the automotive ETFs holding them. Hybrid electric vehicles reached a record 16% of light-duty vehicle sales in the second quarter of 2026, according to the U.S. Energy Information Administration, while battery electric vehicles saw their market share decline to 6% from 7% the previous year. Toyota, Honda and Hyundai Motor Group currently control 86% of the surging U.S. hybrid market, according to Baum & Associates data cited by CNBC, with Toyota selling over 600,000 hybrids in the United States in the first half of 2026 for a 50% market share and Honda's hybrids now accounting for 31% of American Honda's total sales. The shift has been driven by the expiration of the federal $7,500 EV tax credit in September 2025, which raised the cost of pure EVs by thousands of dollars overnight, and by hybrid pricing that has dropped considerably, with Toyota, Honda, Ford, Hyundai and Kia pushing hybrid variants into their most popular mainstream models at a modest upcharge of $1,500-$2,000. Among the funds positioned for the trend, the Global X Autonomous & Electric Vehicles ETF DRIV, with net assets of $359.2 million, has gained 12.3% year to date and charges 68 basis points, while the First Trust S-Network Future Vehicles & Technology ETF CARZ, with net assets of $46.7 million, has rallied 33% year to date and charges 70 basis points, and the State Street SPDR S&P Kensho Smart Mobility ETF HAIL, with assets under management of $18 million, has risen 3.7% year to date and charges 45 basis points.

Labour representatives at German auto supplier Bosch called on Wednesday for political action at EU level to stem job losses in the industry, urging regulations that promote local production. Frank Sell, head of the general works council at Bosch's Mobility unit, which represents around 70,000 German workers, said the transformation of the industry will only succeed if value creation and jobs stay in Europe. Bosch is cutting 13,000 jobs in its core automotive business by the end of the decade, part of a wave of layoffs across the sector as carmakers including Volkswagen, BMW and Mercedes-Benz battle Chinese competition, tariffs and high production costs. Sell demanded clear Made in the EU rules that give the company the time it needs to become competitive. The European Commission is assessing trade measures that could shield local industry from low-cost Chinese carmakers such as BYD and Chery, which are increasingly looking to Europe for growth as their home market slows, and EU leaders are expected to discuss the bloc's widening trade deficit with China next month.

The National Electric Vehicle Policy Committee, known as the EV Board, chaired by Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas, has approved the framework for restructuring the excise tax on electric vehicles using a three-tier rate structure. According to Porchai Teeravej, Director-General of the Excise Department, electric vehicles using domestic parts, or local content, will pay the lowest tax rate; electric vehicles using both imported and domestic parts will pay a higher rate; and fully imported electric vehicles, or CBU, will pay the highest rate. The imported tier will be taxed first in order to reduce the high proportion of imports, and the private sector agrees while discussing a grace period. Under the framework, the highest tier must rise above 10%, though no exact figure has been set. The EV Board has assigned the Ministry of Finance and the Excise Department to continue discussions, with a conclusion expected within September before being proposed to the Cabinet. Dr. Rujiphan Assarat, Assistant Managing Director of Kasikorn Research Center Co., Ltd., noted that most vehicle imports today are battery electric vehicles, or BEVs, at about 72% of all imports, followed by hybrids and plug-in hybrids at 13% and combustion-engine vehicles at 15%. This year, BEV sales are expected to reach one-third of domestic car sales, but the concern is that about 60% of BEV sales are imported vehicles. Under the three-tier tax proposal, the first group covers those with domestic production plants, which will receive tax rates equal to the structure announced effective January 1, 2026, with added conditions on the local content proportion that are still under discussion. There are two scenarios on the table: local content above 40%, and local content of 30% plus e-Parts. If the conditions are met, they will receive rates under the current structure, where BEVs are at just 2%, while hybrids depend on the volume of carbon dioxide emitted. The second group covers those without domestic plants, with rates under discussion at more than 10%, and an import quota set at no more than 10% of the production capacity applied for with the BOI, with production required to compensate for imports. For BEV imports, compensation production is on a 1-to-1 ratio if producing BEVs, or 1-to-2 if producing hybrids. For hybrid imports, compensation production may be either hybrids or BEVs. The third group covers CBU imports with no plan to build a plant in Thailand, which will pay a high rate of more than 30%, though this is not yet finalized. Kasikorn Research Center assesses that this measure will tend to reduce imported vehicles, lower price competition, and push car prices higher, but it will increase vehicle production. Thai vehicle output is expected to return to expansion in 2027 at 4.9%, after an estimated contraction of 1.8% this year.