Swiss banking giant UBS sees increasing pressure on European automakers as Chinese competitors rapidly gain market share. The bank is cutting its earnings forecasts and price targets for several major manufacturers ahead of their third-quarter reports and warns of further forecast cuts for the fourth quarter and 2027 by as much as approximately 20 percent. This is according to a sector analysis from UBS.
For BMW, the price target is cut from 70 to 60 euros, while the neutral rating is reiterated. The bank expects the adjusted operating margin in the automotive business to fall below 2 percent in the third quarter. Mercedes-Benz also has its price target cut, from 50 to 45 euros, with the neutral rating reiterated. UBS sees a risk that the company will lower its full-year margin forecast.
For Volkswagen, the price target is cut from 80 to 70 euros and the neutral rating is reiterated. The bank expects an adjusted operating margin of around 3 percent and slightly less negative free cash flow during the quarter.
Stellantis is expected to report an operating margin below 1 percent and negative cash flow of around 5 billion euros. The price target is cut from 5.80 to 4.50 euros, with the neutral rating reiterated.
For Volvo Cars, the price target is cut from 17 to 13 kronor and the sell rating is reiterated. UBS warns that a loss-making third quarter could lead to further cuts to earnings forecasts for 2026 and 2027.
The bank is more positive on luxury automakers Porsche and Ferrari, which are considered better positioned to withstand competition. For Porsche, the buy rating and price target of 60 euros are reiterated, with expectations of an underlying operating margin close to 10 percent during the quarter.
Suppliers are also expected to be affected as automakers reduce production. UBS points particularly to risks for Aumovio and Autoliv. The price target for Aumovio is cut from 47 to 44 euros, while the buy rating is reiterated. For Autoliv, the neutral rating and price target of 122 dollars are maintained.
The tire sector is meanwhile identified as a brighter area. UBS highlights Continental as its favorite, with the buy rating reiterated and a price target of 90 euros. The bank believes that the company may raise its full-year forecast.
