The first quarter of 2026 has drawn a sharp dividing line through the global automotive industry, with Stellantis staging a convincing turnaround while its German rivals sink deeper into a downward spiral. The Franco-Italian-American group, forged from the merger of Fiat Chrysler and PSA, posted net income of €400 million on revenues of €38.1 billion — a 6% increase from a year earlier that reflects rising volumes and a more disciplined cost base. Operating margins, at 2.5%, remain thin by historic standards, but the return to positive territory after a turbulent 2025 marks a clear inflection point. Viewed from the group’s Amsterdam headquarters, the numbers validate the restructuring measures implemented under new management, including a sharper focus on North American profitability and a rationalised product pipeline that has begun to stabilise deliveries, up 12% over the quarter.

Across the Rhine, the contrast is stark. Volkswagen, Europe’s largest carmaker, saw net profit collapse by 28.4% to €1.56 billion, with revenues slipping 2.5% to €75.7 billion. Analysts in Frankfurt point to three familiar culprits: weak demand in China, where local competitors such as BYD, Geely and Chery have all reported double-digit profit slides after the withdrawal of purchase-tax incentives; declining sales in the United States, where tariffs and price pressure are eroding margins; and the accelerating cost of electrification, which has yet to deliver returns at scale. Mercedes-Benz suffered an even steeper decline, with automotive earnings falling by nearly half as its luxury sedan franchise, especially in China, buckles under the weight of aggressive local rivals and a slowing economy. The group is betting heavily on the new electric C-Class, unveiled in Seoul and Beijing, but as the Stuttgart-based finance chief conceded, a recovery in China is the prerequisite for any broader turnaround. Porsche, the jewel in the Volkswagen stable, saw operating profit drop 22% to €595 million, a sign that even premium pricing cannot fully insulate against the industry’s structural headwinds.

From the perspective of Beijing and Hangzhou, the domestic market remains the central anxiety. Geely’s net profit fell 27% year-on-year despite record first-quarter revenues of 83.8 billion yuan, as the end of purchase-tax incentives sapped consumer appetite. Export growth, particularly to Southeast Asia and Europe, provided a partial offset — a pattern echoed by BYD and Chery. But analysts caution that the overseas push will face mounting trade barriers, including the European Union’s anti-subsidy tariffs on Chinese electric vehicles. The first-quarter results thus paint a picture of an industry in transition, where the winners are those who can combine cost discipline with geographic diversification. Stellantis has shown that a return to profitability is possible even amid uneven demand, but the sustainability of that recovery will depend on its ability to hold market share in Europe without resorting to the price wars that are bleeding margins elsewhere. For Volkswagen and its peers, the road ahead looks longer and rockier, with few signals that a cyclical rebound is imminent.