Autos and parts to remain under pressure
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AUTOS AND PARTS TO REMAIN UNDER PRESSURE
Europe's autos and parts sector .SXAP, although the top gainer in Europe on Wednesday, has had a terrible few months, as waning demand and lower priced competition from China have weighed on earnings.
Profit warnings in the sector have been common, the most recent being a cautious update from Volvo Car VOLCARb.ST today, whose shares are down 3%.
ING strategists think industry data is likely to continue to disappoint.
"We envisage a deceleration in car sales during the second half of the year as consumer demand continues to be more muted following the buoyant post-COVID phase," ING says.
"The mixed economic environment with elevated, although declining, interest rates and political and policy uncertainties in multiple prominent geographies aren't helping either."
Looking ahead to this reporting season, ING expects European OEMs (original equipment manufacturers) to have a soft tone.
"They might use this occasion to reduce and calibrate their targets further for the full year," ING says.
"We feel that the current year is a transition one, where the electrification surge experiences a sharp slowdown before resuming growth at a more modest pace."
But, while the sector is struggling at the moment, rate cuts could bring some relief in 2025.
"For now, we expect a stabilisation in the global auto market volume next year, with some positive aspects more likely than a sharp negative downturn," the Dutch bank says.
"The expected lower interest rate backdrop in the United States and Europe should provide a tailwind for consumer sentiment."
Companies in the auto parts sector include Valeo VLOF.PA, Continental CONG.DE, D'Ieteren IETB.BR and Forvia FRVIA.PA.
(Samuel Indyk)
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