Should one still consider purchasing stock in Volkswagen, Mercedes-Benz, and other notable automakers despite current market conditions?
From US President Donald Trump's new tariffs come potential dips and opportunities for car stocks, especially for BMW and Volkswagen, according to financial experts.
This week saw some major losses in the stock market for well-known car and truck manufacturers. The reason? The USA's threats of a trade war through imposing a 25% tariff on imports from neighboring countries, Mexico and Canada.
European giants like VW, BMW, and Mercedes-Benz rely on Mexico as a production site to deliver vehicles to the American market. Companies like VW and BMW have their own factories in Mexico, while Mercedes-Benz produces in a joint venture with Nissan.
A Closer Look at the Stock Fall
On Monday, the stocks of Volkswagen, BMW, and Mercedes-Benz plummeted by between four to over five percent. Truck manufacturers Daimler Truck and Traton lost around two percent, and the European sector index Stoxx Europe 600 Automobiles & Parts lost over three percent.
Shares Worth Buying, According to Investment Experts
However, analyst Philippe Houchois from the investment bank Jefferies believes German manufacturers will be less impacted and more so on large American car companies like Ford or General Motors. The US import tariffs could increase vehicle prices in the USA or production costs by an average of 6 percent, unless there's a swift de-escalation, he states in a sector study.
The Jefferies expert sees relatively lower risks for Stellantis and Volkswagen due to their more global setup; and BMW and Mercedes-Benz are net exporters from the USA. Consequently, this expert still recommends buying BMW and Volkswagen shares. He rates the shares of Mercedes-Benz as "hold".
Additional Insights:
- Tariff Costs: The imposition of a 25% tariff on imported vehicles could increase costs for these automakers, potentially leading to reduced profit margins unless they can absorb or pass on these costs to consumers.
- Investment Response: To mitigate these tariff impacts, the companies are considering substantial investments in the U.S., including expanding local production and negotiating deals with the U.S. government.
What does this mean for investors?
- Diversification: Investors might consider diversifying their portfolios to include other sectors or companies that are less affected by the tariffs, while maintaining a strategic position in these automotive companies.
- Long-Term Focus: Given the potential for these companies to adapt through strategic investments and partnerships, investors should consider a long-term perspective, focusing on the companies’ ability to adapt to changing regulatory environments.
Keep an Eye on Negotiations
Regularly monitoring the negotiations between these automakers and the U.S. government can provide insights into potential tariff relief and its impact on stock performance. Regularly analyzing market trends and competitor responses can help investors make informed decisions about when to buy or sell these stocks.
Contains material from dpa-AFX
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Disclosure of Interest: The CEO and majority shareholder of the publisher Börsenmedien AG, Mr. Bernd Förtsch, has entered into direct and indirect positions in the following financial instruments mentioned in the publication, which could benefit from the potential price development resulting from the publication: Volkswagen Vz., Mercedes-Benz.
Disclosure of Interest: The managing editor-in-chief, Mr. Frank Pöpsel, has entered into direct and indirect positions in the following financial instruments mentioned in the publication, which could benefit from the potential price development resulting from the publication: Volkswagen Vz..
- The stock market suffered losses this week for car manufacturers, including BMW and Volkswagen, due to the threat of a trade war with the USA's 25% tariff on imports from Mexico and Canada.
- As European giants like BMW and Volkswagen rely on Mexico as a production site to supply vehicles to the American market, their stocks plummeted by up to five percent on Monday.
- According to investment expert Philippe Houchois from Jefferies, BMW and Volkswagen are less impacted by the tariffs and still worth buying, while Mercedes-Benz is rated as "hold."
- Investors might consider a long-term perspective and diversifying their portfolios to include less affected sectors or companies, while regularly monitoring negotiations between automakers and the US government for potential tariff relief.
