LONDON/FRANKFURT (Reuters) - European car giants Volkswagen, Mercedes-Benz and Stellantis ( STLA ) all posted lower sales and first-quarter revenue on Tuesday as they geared up to launch new models, faced higher costs and were hit by weaker demand for new cars as interest rates remain high.

The news hit the automakers' stocks. Mercedes shares were down 3.9%, Stellantis ( STLA ) 2.2% and Volkswagen 1.9%. Mercedes was the worst performer on Europe's blue-chip euro-zone STOXX50E index, VW and Stellantis ( STLA ) were 3rd and 4th biggest fallers.

Weakness in car sales affected mass-market and top-end models alike, with the automakers trying to hold car prices steady and promising improvements as the year goes on and new models hit the market.

"They are all suffering from the same problems more or less. There are delivery problems and margins are under pressure," said Moritz Kronenberger, portfolio manager at Union Investment, which holds stakes in Volkswagen, Stellantis ( STLA ) and Mercedes-Benz.

"The question remains: is the so-called transition year mainly about model changeovers - or is there also a certain market weakness on the demand side? The latter remains to be assumed, also in view of the high inflation, high prices and weak momentum for electric cars."

Europe's legacy automakers face a number of challenges at home and abroad. The German automakers, in particular Volkswagen, face rising competition in China from local automakers.

Volkswagen faced a "very competitive environment" during the first quarter, CFO Arno Antlitz told analysts.

Carmakers are also spending vast sums on new, less-profitable electric vehicles to compete with Tesla and fend off competition from Chinese automakers who are bringing lower-cost electric models to Europe.

MARKET WEAKNESS

After years of tight car supply caused by pandemic-related supply chain problems, they are now chasing consumers struggling with higher costs and interest rates.

"We have seen a market weakness in the first quarter," Mercedes-Benz chief financial officer Harald Wilhelm told analysts. "Also our top-end vehicle products could not completely escape from that market weakness."

Wilhelm added that the premium German automaker remained "vigilant about the global macroeconomic and geopolitical outlook", adding Mercedes would defend high pricing levels for its luxury cars as model changeovers and supply chain bottlenecks hurt its results.

The German luxury carmaker reported a 30% drop in first-quarter earnings, while Volkswagen posted a 20% decline in operating profit and Stellantis ( STLA ) said its revenue fell 12% in the quarter.

Despite a drop in sales for the automakers and lower profit at Volkswagen and Mercedes - Stellantis ( STLA ) only reported revenue figures - all three stuck to profit or sales targets for 2024 as their new models hit the market.

Speaking to reporters, Stellantis CFO Natalie Knight said the automaker's shipments and revenue were impacted by the transition to the group's new product portfolio and the company was reducing inventories "to reinforce our strong relative pricing" ahead of product launches this year in key regions.

Jefferies analysts said in a client note that Stellantis' ( STLA ) below-consensus revenue largely reflected its performance in Europe, where both sales volumes and prices were worse than expected. Net pricing was "more resilient" in other regions, they added.

Volkswagen said orders picked up towards the end of the first quarter, which should lift its second-quarter results. Europe's largest automaker plans 30 new models this year, which should boost sales throughout the rest of the year.