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Car stocks in Europe have reached record levels as traders bet strongly on 2022

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LONDON () – European car inventories rose to a record high of more than 2% on Wednesday as investors rallied in the sector as car sales are expected to pick up in 2022.

FILE PHOTO: BMW i Vision Circular concept car at the BMW event before the IAA Mobility 2021 Munich Motor Show in Munich, Germany, September 6, 2021. / Michaela Rehle

Over the past few months, investor interest in auto stocks across the region has grown, with Europe’s auto and auto parts index rising more than 8 percent this week alone, surpassing the November record.

The sector grew 33 percent in a year, surpassing the pan-European index, which grew 23 percent during the same period.

Graph: Anti-STOXX car sector

After automakers had to deal with high inventories due to a slowdown in sales due to a pandemic over the past two years, the lack of chip supply in 2021 will force some to cut production, though. things in the sector began to change.

Shares in Germany’s BMW rose 2.3 percent after the group reported that sales of more than 2.2 million cars from the BMW brand were at a record level in 2021, exceeding the 2019 level.

BofA expects passenger car production and sales in Europe to increase by 10 percent this year, while Daimler’s Mercedes-Benz, Renault and Stellantis forecast projected growth rates of about 20 percent.

BofA research analyst Horst Schneider said: “We still have great potential and we are positive about the growth of passenger car sales in fiscal 22.

ROOM FOR GROWTH

Analysts say that the increase in car prices in 2021 will offset the increase in costs in the second half of the year. Nevertheless, car stocks in Europe are still much cheaper than their U.S. counterparts.

Europe’s automotive sector is trading with only seven times the forward revenue. This is 16.8 times more for the STOXX 600 benchmark and 42.4 times more for the U.S. auto sector. U.S. carmaker Tesla has a market capitalization of more than twice the entire STOXX 600 index.

“Given that cars are very cheap, but at excellent prices even at lower volumes, profitability is strong and the chip shortage should be alleviated,” said Emmanuel Kau, a capital strategist at Barclays.

Shares of Renault rose 4.4 percent as U.S. chipmaker Qualcomm announced it had signed deals with French carmaker and Volvo Cars for delivery.

Stellantis shares rose 3.4 percent as the Milan-listed company partnered with Amazon.com to develop cars and trucks with Amazon software on the dashboard and place electric vans in the online retail giant’s delivery network. did.

Daimler shares also rose 3 percent, but the company has alerted owners of its luxury cars to a technical malfunction that could lead to a fire.

With JP Morgan hesitating to buy domestic combustion engines, delaying the purchase of electric vehicles and a shortage of chips, JP Morgan forecasts growth of European passenger car production for 2022 and 2023 at 4% and 6, respectively. reduced to%.

According to Barclays, at a time when raw material shortages continue, demand is still above supply, and the area of ​​cars and auto parts is ready to grow.

Interview with Joyce Alves; Edited by Mark Potter

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