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Bull Trader USA

In the battle for EV dominance in Europe, Bernstein picks 7 winners

Chinese electric vehicle (EV) manufacturers are making a push into Europe and could take market share away from established U.S. and local brands, according to Bernstein. The investment bank said seven global automakers were well placed for this scenario, either able to capitalize on the transition or compete against Asian rivals. European brands have already seceded 20% of market share to Japanese and South Korean carmakers over the past two decades, according to IHS. More recently, Tesla has also demonstrated its ability to capture significant volumes quickly with its Model 3 and Model Y vehicles. Using what it described as conservative estimates, Bernstein predicted that Chinese automakers will hold less than 5% market share by 2030. However, “their good value-for-money products and smart entry strategies may enable much faster growth. In an accelerated scenario, where both Tesla and Chinese brands capture significant market share, incumbents could lose up to 20%,” the bank’s analysts wrote. “Weaker players would face greater pressure, but none of the European mass-market brands would be immune.” American automaker Tesla has so far gained a sizable portion of the EV market in Europe, mainly at the expense of Japanese manufacturers and U.S. rivals which lagged their European counterparts when introducing EV models themselves. Considering the above scenario, the investment bank rated the following 7 auto stocks ‘outperform’: Bernstein expects shares of Renault to rise by 75% over the next 12 months, which should reverse the steep decline it has faced over the past three months. The investment bank said the French automaker’s share price has underperformed recently due to its inability to capture EV sales. “This is likely a function of the EV market’s initial skew towards more expensive and larger models, which naturally generate higher share for premium OEMs,” said Berstein’s analyst Daniel Roeska in a note to clients on June 1. Bernstein also expects shares of Volvo Car and its Chinese parent Geely Auto to rise by 34% and 53% over the next year. Roeska noted that despite the fact that Chinese-owned European brands such as MG, Volvo, and Polestar currently account for 8% of the region’s EV market, long-term dominance can only be sustainable through local production. That means the next two years will be critical for Chinese companies as they announce plans for manufacturing in Europe, which may begin only by the end of the decade. The analyst said this would allow the Chinese companies to avoid import tariffs and compete on pricing while building brand awareness and local expertise. Mercedes-Benz and Aston Martin in the premium segment are also expected to do well over the 12 months, according to Bernstein.

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