Earnings give European auto stocks respite as China reshapes the industry
XLY•European automakers’ shares rebounded after third-quarter earnings, with Stellantis rising 15% in one session and Volkswagen and Renault edging up from multi-year lows. Chinese competition and doubts about the sector’s long-term prospects continue to weigh on investors.
1. Earnings lift shares
Shares in Volkswagen, Stellantis and Renault halted a punishing selloff after recent earnings, as the automakers pursue electric-model offensives and restructuring to restore investor confidence. Stellantis rose 15% in one session on Wednesday after its third-quarter results, helped by confidence it could exceed cost-cutting targets; Volkswagen and Renault also edged up from multi-year lows.
2. Chinese competition grows
European carmakers are competing with Chinese manufacturers that have advanced in electric vehicles, cost competitiveness and software. Chinese brands’ share of the European market rose to more than 10% by the middle of this year, from a negligible level in 2021, when Volkswagen shares were at their peak. Volkswagen, Stellantis and Renault have appealed to Brussels for support, including proposed incentives for local manufacturing.
3. Turnarounds face doubts
Volkswagen plans to cut around 100,000 jobs and may close plants in Germany. Stellantis is betting on new models, a revamped brand strategy and partnerships with Chinese automakers. Investors remain skeptical that these efforts can restore the companies’ former profitability and valuations, while capital flows into AI companies and stocks are drawing money away from other sectors, said Massimo Baggiani of Niche Asset Management.
