Autos – A Long Drive Ahead

Research evidence excerpt

Autos – A Long Drive Ahead

IdeaM

Autos have significantly underperformed over the past

month

The autos sector has been our highest-conviction underweight since our Mid-Year

Outlook: We have argued that established OEMs are facing a challenging backdrop, with

structural headwinds of a margin-dilutive EV mix, intensifying competition from Chinese

automakers, inflation putting pressure on affordability, tariff pressures, not to mention

the renewed geopolitical uncertainties. The headwinds are particularly pronounced for

volume OEMs as our equity analysts highlight (European OEMs: 2026 getting darker).

But the sector has repriced wider over the past month. Following profit warnings in

June, markets have increasingly priced in the downside for the sector. At the index level,

the spread differential between autos and the overall EUR IG market has widened from

8bp in early June to 17bp now, moving valuations much closer to the five-year wides again

( Exhibit 3 ), raising questions on whether this is enough to turn more constructive on the

sector.

Exhibit 3: Autos index spread pickup to index now closer to the Exhibit 4: … albeit significantly larger discounts were observed

high-end of the past five years… in prior large sector/market downturns

EUR Autos vs. Overall IG Index Spread (bp) Liberation Historical periods of autos stress

30 Day Middle East EUR IG Autos Autos vs. EUR IG

2022 Energy/ Conflict March Date Event Spread (bp) Spread (bp)

25 Inflation Crisis 2024 Profit Peak Apr 2005 GM/Ford Crisis 261 174

Warning

20 Wave Mar 2009 GFC 521 211

15 Sep 2015 Dieselgate 181 30

10 Feb 2019 4Q18 Cyclical Downturn 172 36

5 Apr 2020 Covid 364 136

Jun 2022 Energy Shock 220 20

Nov 2024 2024 profit warnings 131 21

-5 Apr 2025 Liberation day 146 28

-10 Mar 2026 Iran Conflict 119 18