European Auto Stocks Continue to Bleed as German VW Reaches a New Low
European auto-industry faces multiple challenges and heavy margin pressure. Volkswagen is trading at the lowest valuation level on record
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Volkswagen is trading at the lowest valuation level on record, as investors have priced EU's carmakers for a gloomy outlook, Bloomberg reports#european #vw #auto #industry pic.twitter.com/5YrLnDB6aW
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It’s been a tough year for autos and the promising recovery from the Covid pandemic now appears long gone. The Stoxx 600 Autos & Parts Index is the second-worst performing subsector in Europe after mining, plagued by ailing demand for cars, margin pressure and the region’s trade tensions with China.
The gauge has plunged 24% since an April peak, hitting a 10-month low this week, and has a history of dropping further during downturns. Volkswagen AG, the region’s largest auto manufacturer, is now trading at its lowest valuation level on record.
“The sector is not yet at a point to bounce back sustainably, even if a short bounce is always possible,” said Wolf von Rotberg, equity strategist at Bank J Safra Sarasin. “It’s the culmination of a structural shift in the market itself, homegrown issues and the prospect of a cyclical downturn which may further weigh on demand and earnings.”
The industry has been struggling with sluggish demand, particularly in the key Chinese market, while firms are facing heavy competition on electric vehicles from the Asian nation’s producers. A trade spat between China and the European Union, as well as stricter EU emissions limits for 2025 that could lead to billions in fines, are adding to the sector’s woes. Volkswagen is considering closing factories in Germany for the first time.
German high-end manufacturer BMW issued a profit warning on Tuesday, dealing another blow to the industry after peers Volkswagen and Porsche AG had already cut their outlook this year. And things may not be over just yet, with “few hiding places” for carmakers, according to Morgan Stanley analysts including Javier Martinez de Olcoz Cerda.
