Car rates

European auto stocks hit record high as traders bet on solid 2022

The BMW i Vision Circular concept car is seen at a BMW event ahead of the 2021 IAA Mobility Munich Motor Show in Munich, Germany on September 6, 2021. REUTERS / Michaela Rehle

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  • European auto and parts index hits record high
  • The sector has gained 33% in one year
  • BofA expects light vehicle sales to increase 10%
  • European auto sector trades at 7 times futures earnings, US at 42 times

LONDON, Jan. 5 (Reuters) – European auto stocks rose more than 2% to an all-time high on Wednesday as investors grew increasingly bullish on the sector amid rising sales expectations of stronger cars in 2022.

Investor interest in the region’s auto stocks has flared in recent months with the European Auto and Parts Index (.SXAP) rising more than 8% this week alone, topping a previous record in November.

The sector gained 33% in one year, outperforming the pan-European index (.STOXX), which gained 23% over the same period.

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Automotive sector versus STOXX

After automakers had to contend with high inventories for the past two years due to a pandemic-induced sales slowdown, things started to turn around for the industry despite a shortage of automotive supplies. chips in 2021, which has forced some to reduce their production.

BMW shares in Germany rose 2.3% after the group said it achieved record sales of more than 2.2 million vehicles of its BMW brand in 2021, beating 2019 levels. Read more

BofA expects European production and sales of light vehicles to increase by 10% this year, with Daimler (DAIGn.DE) Mercedes-Benz, Renault (RENA.PA) and Stellantis (STLA.MI) leading the way. peloton with projected growth rates of around 20%.

“We maintain that there is still substantial catching up potential and we remain positive on light vehicle sales growth in FY22,” said Horst Schneider, research analyst at BofA.

ROOM FOR GROWTH

Rising car prices in 2021 offset higher costs in the second half of the year, analysts said. Still, European auto stocks are much cheaper than their American counterparts.

The European auto sector is trading at just seven times earnings over time. This compares to 16.8 times for the benchmark STOXX 600 and 42.4 times for the US automotive sector (.SPLRCAU). The market capitalization of U.S. automaker Tesla (TSLA.O) alone is more than twice the size of the entire STOXX 600 index.

“Automobiles are very cheap, but profitability is strong given an excellent price mix, even on lower volumes, and chip shortages are expected to ease,” said Emmanuel Cau, equity strategist at Barclays.

Renault shares climbed 4.4% as US chipmaker Qualcomm (QCOM.O) said it had struck deals to supply the French automaker and Volvo Cars (VOLCARb.ST).

Stellantis shares rose 3.4% as the Milan-listed company partnered with Amazon.com to develop cars and trucks with Amazon software in dashboards and roll out electric vans to the network. delivery from the online retail giant. Read more

Daimler shares also rose 3% despite reports the company informed owners of its luxury cars of a technical defect that could start a fire. Read more

Not everyone is optimistic, JP Morgan has cut its forecast for European light vehicle production growth to 4% and 6% for 2022 and 2023 respectively, citing consumers’ reluctance to buy internal combustion engines, the postponement of purchases of electric vehicles and the shortage of chips.

But with demand still outstripping supply amid an ongoing shortage of raw materials, the auto and parts industry is poised to grow, according to Barclays.

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Reporting by Joice Alves Editing by Mark Potter

Our Standards: Thomson Reuters Trust Principles.