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Have autos hit the brakes too hard?

Have autos hit the brakes too hard?

European auto equities have materially underperformed, but the medium-term outlook may be less negative than recent equity performance implies. The sector has fallen c 30% cumulatively over three years and c 32% over five years, versus gains of c 43% and c 38%, respectively, for MSCI Europe. The fundamental concerns are real: vehicle demand has weakened, Chinese competition has intensified, profitability remains under pressure and electrification is reshaping industry value pools. However, forecasts point to stabilisation rather than structural volume decline, while the STOXX Europe 600 Automobiles & Parts Index (SXAP) trades at just 0.60x book value. For a contrarian investor, the opportunity is therefore selective: a strong cyclical recovery may not be required if volumes stabilise, self-help supports margins and earnings expectations begin to find a floor.

Written by

Harry Kilby

Analyst

European auto equities have struggled to sustain a recovery

Exhibit 1 – STOXX Europe 600 Automobiles & Parts Index cumulative performance
Source: Bloomberg, Edison Investment Research. Note: As at 2 September 2026.

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