European auto manufacturers reported mixed profits in the first half of 2022 as they emerged from coronavirus lockdowns and a semiconductor shortage. Forecasts for the rest of the year were surprisingly positive, despite worries about peace after Russian invaded Ukraine and an economic recovery threatened by inflation and recession.

But if energy shortages force the lights to go out and factories to shut, all bets are off. Drought is also causing water levels on the Rhine to fall, and this threatens economically crucial trans-European transport.

Stellantis was the standout performer, and sees strong profits for the rest of 2022. Even ailing Renault was able to put a brave face on its prospects. Mercedes was said to be a little overconfident. BMW’s latest profits were down, but it retained its 2022 target.

LMC Automotive’s August forecast predicts sales in Western Europe will slide 6.4% in 2022, roughly the same as its July prognosis although that’s an improvement on the previous month’s forecast of a 7.4% fall. It looks unhealthy compared with its forecast at the start of the year that sales would bound ahead by a healthy 8.6%. The invasion of Ukraine destroyed that.

Stellantis’s adjusted earnings before interest and tax jumped 44% in the first half, compared with the same period of 2021, to €12.4 billion ($12.8 billion). Stellantis was formed by a merger of Groupe PSA and Fiat Chrysler Automobiles in January 2021. Stellantis owns European brands like Peugeot, Citroen, Opel, Vauxhall, Fiat, Maserati, Alfa Romeo and Lancia, and U.S. ones Jeep, Dodge and Chrysler. The first half profit margin rose to 14.1% from 11.4% a year earlier. Stellantis only reports profit every six months.

Stellantis still expects double-digit margins for the whole year, despite saying European and North American sales would slide 12% and 8% this year. 

Moody’s Investors Service upgaded some Stellantis debt and liked its strong liquidity and high margins “which should be resilient, even at times of increasing headwinds related to product component availability, raw materials as well as energy cost inflation and a deteriorating consumer sentiment,” Moody’s analyst Matthias Heck said.

Heck liked Stellantis’s ability to use merger synergies to cut costs.

Moody’s summed up the harsh times ahead, common to the world’s biggest automakers. 

“Moody's expects that Stellantis' margins will come under pressure once global automotive production is less constrained from the global semiconductor shortage. Moreover, consumer sentiment will likely suffer from high price inflation, including higher energy prices and cost of living, and higher interest rates,” Stellantis said.