Automotive News Europe — 2026-01-26
Automotive Industry
After a year of earnings downgrades and margin pressure, Europe’s automakers face a complex 2026: a modest sales growth forecast for the region combined with persistent profit challenges that will separate makers of small, affordable cars from those still relying on premium pricing power.
The divergence signals a fundamental shift in which business models will thrive as regulation, electric vehicle adoption and Chinese competition reshape the competitive landscape.
European research analysts and economists are seeing some signs of a small and moderate recovery in the broader economy that could fuel an increase in new-car sales of 1 to 2 percent, according to several forecasts, after rising 2.3 percent last year, preliminary figures from market researcher Dataforce showed.
By contrast, analysts expect new-car sales in the U.S. and China to decline.
“In a global context, Europe looks like the best place to be,” Michael Tyndall, senior global autos analyst with HSBC, told Automotive News Europe.
Any forecast needs to be taken with caution, as the events of the past few weeks including U.S. President Donald Trump’s on-again, off-again trade war sent global auto stocks on a roller-coaster ride.
For the most part, though, automotive investment analysts are saying there is scope for growth in both European auto sales and stock prices this year because of rising demand for EVs, easing of emissions compliance rules and the prospect of new regulations on increased local content.
Regulation may help smaller, more affordable cars more than premium and luxury models, which could help Europe’s volume manufacturers, analysts said.
The bottom line is that Europe is moving toward conditions that are increasingly favorable to volume producers and those manufacturers that have used leaner years to restructure, slash costs and figure out how to make their vehicles more affordable.
Why VW is a ‘No. 1 pick’
“Our No. 1 pick is Volkswagen,” Tyndall said. “Earnings growth has to come from self-help.”
VW Group has long tested investor patience, but analysts said the company’s efforts have led to tangible improvement in core brand margins and fixed costs, while Audi and Porsche should be less of a drag on earnings.
The result for VW Group could be nearly unchanged revenue, but rising operating profit margin and nearly doubling of earnings per share, according to HSBC estimates. Tyndall sees VW at the beginning of a phase of rising profits that could be sustained at least through 2027.
Stellantis on track to boost sales
Stellantis is a bit of a hybrid in the European landscape because it is so heavily dependent on the U.S. consumer, but HSBC, largely in line with a broader consensus forecast, sees a 4 percent increase in sales and deliveries worldwide.
Tyndall warned that Stellantis could take a more than €5 billion hit this year from the pivot away from EVs in the U.S., following huge write-downs by GM and Ford.
Tyndall projects that Stellantis’ operating profit margin could double this year to about 3.8 percent, but one-offs may dilute 2026 earnings per share, which he sees at around €1.36.
Renault’s EV push could dilute earnings
Renault has been on a huge investment drive to build out its EV portfolio, which could help drive retail sales higher this year. The increase in its share of BEVs, however, is expected to dilute earnings, so analysts forecast a slight decline in Renault’s operating profit margin to about 6.2 percent.
HSBC estimates Renault earning per share could swing from a 2025 loss to €7.74 , slightly higher than consensus forecasts.
Premium brands will struggle to match previous margins
BMW and Mercedes-Benz are locked in fierce competition, as both plan a “product blitz” this year on their new next-generation vehicle platforms, Tyndall said. He sees a small improvement for both companies in their automotive profit margins “but it’s hard to see the path back to 8 to 10 percent corridor in absence of restructuring plans.”
With Audi already bringing new products to market, analysts said they are watching to see whether BMW will be able to defend its BEV lead this year.
Porsche is making strides, but new CEO Michael Leiters, who took over this month, has a lot of work to do. Analysts don’t expect Porsche to return to 10 percent profit margins anytime soon. Porsche remains a work in progress in 2026.
What are the tailwinds for 2026?
Europe’s automakers are getting some tailwind from the broader economy, especially in Germany, where expansive fiscal spending is fueling a recovery of growth to a forecast 1.2 percent this year from 0.2 percent growth last year.
Economists, however, are still concerned that lagging structural reforms and a volatile political environment — call it the Greenland effect — makes it harder to turn sales into profits and could still put a ceiling on potential economic growth and benefits to manufacturing industries such as automotive.
The European Central Bank warned in a recent report that industrial activity remains subdued, with manufacturing facing continued headwinds from trade uncertainty, tariffs and a stronger euro.
The economic tailwind may help stabilize showroom traffic and fleet replacement, but economists at Goldman Sachs argue that the upside is limited because Europe’s underlying growth engine remains weak, constrained by high energy costs, underinvestment — especially in high-tech sectors — regulatory burden and unfavorable demographics.
European automakers face an additional set of costs. Demand for EVs remains strong, even if it is less than what automakers hoped for, and EU regulation is still pushing them toward zero-emission vehicles.
An improving economy could have a positive impact on consumer confidence this year, which could also translate into selling more cars. But in Europe, fleet operators, which make up 60 percent of new-car sales in Europe, are still cautious.
Muted demand from key player: Fleets
In its European outlook for 2026, Cox Automotive cited muted demand from fleet operators as one of the main reasons that European demand would probably remain constrained this year and keep overall volumes behind pre-pandemic levels.
Cox said that fleet operators would most likely “prioritize strategic timing” for replacing vehicles in their fleets to “maximize profit margins.” That could mean holding vehicles longer.
In the face of the uncertainties in the forecasts for Europe’s economy, some analysts are skeptical that Europe’s auto markets will buck the global trend.
Felipe Munoz, an independent industry analyst, is skeptical that European sales will turn out as robust as being forecasted. He said automakers building in Europe for export will face declining markets in North America, Europe and China. He added that slower sales in Europe combined with high fixed costs from EV investments will put pressure on automakers’ profit margins, limiting the potential for a recovery of earnings.
“In general, we should see eroding profits this year,” Munoz said.
Analysts said Europe’s automakers enter 2026 in better shape than a year ago, but the backdrop still looks more like a transition than a classic cyclical upswing, with tariffs, regulation and technology investment in EVs and software keeping pressure on margins.
For investors, the opportunity lies less in booming demand and more in identifying which companies have done the hard work to be prepared for the next upswing. And the winners may not be the usual suspects.