From Morningstar: 2025-03-25 08:26:00

Investors are concerned about the future of the European automotive sector due to Trump’s trade policy and competition from Chinese EV manufacturers like BYD. Electric vehicle revolution in Europe is stalling due to government climate targets and charging infrastructure issues.

European car stocks are seen as undervalued despite threats. Trump’s tariff plans could have a significant impact on European car companies like Stellantis, BMW, Mercedes-Benz, and Volkswagen.

European car manufacturers are exposed to Trump’s tariffs, with potential cost increases and profit margin impacts. Relocation of production lines to the US could lead to higher labor costs and capital expenditure.

The success of Chinese EV manufacturers and excess production capacity have been hurting European car companies. European manufacturers have been more affected by competition from Chinese companies compared to American counterparts.

The European Commission’s Industrial Action Plan aims to relax CO2 emissions standards for cars and vans, saving European manufacturers billions. However, the plan lacks competitiveness against Chinese producers and may not bridge the gap effectively.

Despite challenges, European automotive stocks are undervalued. Market valuations suggest that European car stocks won’t generate cash flow in the future, but there is significant upside potential from current levels.

Morningstar’s analysis shows that European car stocks are undervalued, with Volkswagen, Mercedes-Benz, and Renault trading as the most undervalued. Renault’s capital allocation capabilities and partnerships make it an attractive investment.

Volkswagen’s market value doesn’t reflect the value of the company’s holdings, including Porsche and Traton. Mercedes-Benz’s stock has declined but long-term profitability is expected to improve with strategic plans and potential stake monetization.

Morningstar highlights the undervaluation of European car stocks, with Volkswagen, Mercedes-Benz, and Renault offering significant upside potential. The market may not fully reflect the value of these companies’ assets and strategic plans.



Read more at Morningstar: Can European Car Stocks Survive Trump Tariffs and…