China's carmakers are already extremely successful on the domestic market, and now they are also on the offensive in Europe. However, some share prices, like that of Tesla, have already risen sharply.
7 September 2023. FRANKFURT (Börse Frankfurt). It wants to be a "festival for sustainable mobility": The "IAA Mobility" international auto show in Munich, which started this Tuesday, is focusing entirely on electromobility. However, this is not necessarily the trademark of German carmakers, but rather something with which addresses such as Tesla and also China's BYD score points.
A study by the major Swiss bank UBS from last week has once again hurt Europe's carmakers - also on the stock market. The bank downgraded Volkswagen (DE0007664039) from "neutral" to "sell." For the past six months, Volkswagen's share price has now fallen by 22 percent, Mercedes-Benz by 12 percent and BMW by just under 5 percent. BYD and Tesla shares, on the other hand, are up 11 percent and 31 percent, respectively.
UBS predicts growing competition for Europeans from Chinese manufacturers, especially mass producers. A handful of Chinese electric vehicle manufacturers are on their way "to becoming new global champions". The thesis that BYD has a sustainable cost advantage of around 25 percent over its competitors despite growing trade barriers also caused a furor. The bank also expects China's automakers to almost double their global market share by 2030, from 17 to 33 percent. The market share of established manufacturers, on the other hand, will fall from 81 to 58 percent, it said.
BYD: Highs not yet reached again
UBS had already confirmed its "Buy" recommendation for BYD in July. At the IAA, BYD presents six sedan and SUV models under the motto "We build the green mobility dream together". The unveiled new Seal sedan is seen as a competitor to Tesla's Model 3 and models from German automakers Mercedes, Audi and BMW. BYD 'H' shares (CNE100000296) - "H" stands for Hong Kong-listed shares of Chinese mainland companies - are trading briskly, according to Roland Stadler of Baader Bank. Despite significant price gains, however, the highs of last summer have not yet been reached again. Investment legend Warren Buffett has been a major shareholder in BYD since 2008, but has been reducing his positions bit by bit since last year, at a high profit.
Stadler
Geely with heavy share price losses
Geely Automobile was one of China's first carmakers. The first car rolled off the production line as early as 1998. According to figures from the US magazine Forbes, Geely was number four in China in terms of sales in 2022. "Geely is also known for its acquisition of Volvo in 2009/2010," reports Walter Vorhauser, who trades Geely shares (KYG3777B1032) for Oddo BHF. Geely has just unveiled the luxury e-SUV model called Zeekr X, available in this country next year. "Technical data such as the range of 440 km as well as horsepower and torque are promising, Zeekr X is well received," explains Vorhauser. The car is also attractively priced, he adds. However, the stock has not performed well; at 1.14 currently, it costs only one-third of its 2021 peak. "Now it looks like it's bottoming out," Vorhauser notes. But he points out that the number of Chinese automakers has risen sharply in recent years. "Whether Geely will prevail is unclear."
Tesla on the verge of new highs?
However, Vorhauser believes that Tesla (US88160R1014) will prevail in any case. "The renewed price cuts are not hurting the group." Tesla has just ushered in a new round in the price war, cutting prices for its premium S and X models in China by nearly a fifth in some cases. At the IAA, Tesla will present, among other things, the new version of the Model 3, a refresh with many novelties that are well received. The share price had risen rapidly in 2020 and 2021 to over 350 euros, but fell sharply in 2022 to below 100 euros. Now it's back up to 232 euros. "We should see the highs again soon," says Vorhauser.
Vorhauser
Partly high valuations
However, BYD and Tesla are already highly valued, at least measured by the price-to-book ratio. Tesla is currently trading at fifteen times book value, BYD at five times. German shares, on the other hand, are trading below their book value, with BMW's P/B ratio at 0.7, Mercedes' at 0.8 and VW's at just 0.35. And UBS does trust Tesla to become one of the world's largest automakers by 2030 and had already raised its price target from 220 to 270 U.S. dollars at the end of July. However, the Tesla share was downgraded from "Buy" to "Neutral". The recent strong share price performance already fully reflects the latest increase in demand from the electric car manufacturer, it said in justification.
by: Anna-Maria Borse © 7 September 2023, Deutsche Börse AG
Anna-Maria Borse is a finance and economics editor specializing in financial markets/stock markets and economic topics.
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