Road & Spak: On insourcing, memory, European restructuring and early 2Q26 thoughts

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Road & Spak: On insourcing, memory, European restructuring and early 2Q26 thoughts

Companies like VC, APTV are also talking about onboarding additional memory

suppliers. So, on the margin, memory availability for 2027+ seems slightly better

(i.e. lower risk of impacting production) though we still expect that pricing will be

up meaningfully in 2027 and that the automakers will cover most of it (still a

relatively small part of overall vehicle BOM).

Will suppliers need to up European restructuring?

Reuters is reporting that VW is considering shutting four German factories in what could

be one of the largest restructurings in auto history. The 4 facilities listed in the article are,

Hanover, Zwickau, Emden and Neckarsulm (Audi) and are forecasted to produce ~600k

vehicles in 2026 according to Mobility Global. It may not just be VW. European

automakers may face tough decisions as they face more pressure from Chinese OEMs.

This could mean more of the cash flow generation from suppliers has a call on it from

European restructuring. While some suppliers state they are well positioned with

Chinese OEMs for exports and as they localize, in our view, the best case scenario is 1:1

substitution so the downside risk is far greater than the upside potential. See Fig. 1 for

our estimate of suppliers' European exposure and Fig. 2 for our estimate of their

exposure to VW. See our Auto Industry exposure guide.

Figure 1: 2025 sales exposure to Europe Figure 2: 2025 sales exposure to VW

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Source: Company reports, UBS estimates Note: *PF for VGNT spin. **PF for sale of Source: Company reports, UBS estimates Note: *PF for VGNT spin. **PF for sale of

OH. ***PF for DWL acquisition. ****PF for Voxx. ^Adjusted for sales in China but OH.