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In a report on the European auto sector, analysts noted that at the beginning of 2023 all macro indicators pointed “the wrong way,” but five months into the year “the data is not showing a broad deterioration, quite the contrary.”
The United States, according to Bernstein estimates, was supposed to be “the first region to suffer a material slowdown, and indeed, we did see revenue momentum dip as the banking crisis briefly took hold.” But volumes have remained “steady” and price discounts have remained at “low levels,” indicating “healthy and growing demand.”
As for China, the country has experienced a “slow but steady recovery YTD,” while now we are witnessing “several months of falling channel inventories.” This – analysts clarified – could suggest “strong underlying demand, however the continued rise in discounts would suggest otherwise.”
In general, Bernstein believes it is the right time “to start ranging the upside in 2024 and 2025,” despite higher interest rates and margin dilution due to “rising EV penetration.”
For the coming months, experts expect attention to focus primarily “on the potential deterioration of the European markets,” on positive signals from the United States, and on the potential recovery of the Chinese market.
On individual stocks, Bernstein warns that “optimism on the US would provide near-term headwinds to Stellantis,” while a better recovery in China could help BMW (ETR:BMWG) and Mercedes (ETR:MBGn).
Also weighing on Stellantis are “aggressive price cuts” by Tesla (NASDAQ:TSLA), which more severely damage mass-market automakers such as former FCA, Volkswagen (ETR:VOWG_p), and Renault (EPA:EPA:RENA).
