'Most at risk': UBS downgrades 2 major automakers over China EVs threat

Published Mon, Sep 4 20237:47 PM EDT

UBS has downgraded both Volkswagen and Renault over mounting competition from Chinese electric vehicle manufacturers. VW The investment bank downgraded Volkswagen from "Neutral" to "Sell" and cut its price target on the stock from 135 euros ($145.78) to 100 euros a share. This implies a downside of 8% from current levels. Analysts at the bank believe Volkswagen is the global automaker most exposed to the rise of Chinese carmakers. As China's former No. 1 automaker, the company is at risk of being marginalized as Chinese companies, such as Warren Buffet-backed BYD , take market share. As the No. 1 automaker in Europe, Volkswagen also faces intensifying competition as higher numbers of cheaper Chinese electric vehicles are imported into the continent. VOW3-DE RNO-FR 1Y line UBS said VW's woes have been building since it missed an opportunity to gain a first-mover advantage in electric vehicles. "Against our initially positive view, we believe VW ceded its first-mover advantage in EVs with execution in key areas below our expectations," said UBS analysts led by Patrick Hummel in an Aug. 31 note to clients. "Recent management changes & strategic action address the obvious challenges, but it we believe it unlikely VW can weather the upcoming Chinese advance without negative earnings impact." Renault Similarly, France's Renault was also downgraded by the bank to "Sell" from "Neutral" with its price target cut to 31 euros from 42 euros. Although UBS expects Renault's financial performance to remain strong in coming quarters, the bank said most indicators are no longer improving. With about 70% of sales in Europe and a 10% market share, the investment bank said Renault is highly exposed to competition from Chinese automakers and Tesla. "We think Renault and VW are most at risk here, given their higher European exposure. We estimate Renault's European market share of c10% today will reduce towards 7% by 2030," said UBS analysts led by David Lesne in a separate note to clients. European carmakers like Mercedes-Benz and BMW have been forced to move quickly to show the market they're ready to be significant players in the electric era. On Sunday, both auto giants unveiled electric vehicles built on new architectures that will underpin their EVs in the future as part of the IAA Mobility motor show in Munich. Mercedes-Benz said its concept car has a range of 750 kilometers (466 miles), significantly more than current market leader Tesla's EVs.