According to the Futu Securities APP, European auto stocks are currently very unpopular, to the point that investors are continuously reducing their shareholdings. The problems existing in the European auto industry have led to its valuation nearing historic lows, which typically serves as a major motivation for potential buyers.

Data shows that the STOXX 600 Automobiles and Parts Index is one of the worst-performing indices this year. Analysts predict that profits for European auto manufacturers will decline by 13.6% in 2024. Investors believe that significant cost-cutting measures have become inevitable due to complex technological transitions, fierce market competition, and consumers' increasing price sensitivity. Analysts state that economies of scale will be key, particularly for mass market brands like Volkswagen.

The current price-to-earnings ratio of European auto stocks, compared to the broader STOXX 600 Index, is at a discount of nearly 60%, close to a record low. According to a survey by Bank of America this month, automotive stocks are the most undervalued among European fund managers overseeing $284 billion in assets.

Rolf Ganter, Chief Information Officer of UBS Global Wealth Management Europe, said, "Some of these stocks have room for further decline due to pricing falling from peak levels, stagnant sales growth, and rising labor costs. If the situation worsens, they could easily fall another 10% to 20%." "The valuations are really cheap, but we are fundamentally bearish on this industry."

Stock prices of Volkswagen, BMW, Mercedes-Benz, Renault, and Stellantis have fallen by 29% to 50% from their peaks this year, reaching multi-month or multi-year lows. Gilles Guibout, Head of European Equity Strategy at AXA Investment Managers, said, "The Western auto industry is facing significant challenges due to the dominance of Chinese cars, and people are not willing to spend as much money on electric cars as they did a few years ago." "Either you can raise prices and prove to customers that a premium is justified, indicating that your brand is worth a premium. Or you must cut costs. There is no other choice."

In August of this year, European Union auto sales declined by over 18% year-on-year. Among them, sales of pure electric vehicles declined by 44% year-on-year, with sharp drops in sales in Germany and France, the two largest electric vehicle markets in the EU. Andreas Bruckner, Investment Strategist at Bank of America, said, "There may be quite a few profit warnings, indicating that now may not be the time to buy European auto stocks."

Due to the cooling demand of consumers in Europe for electric cars, several large auto manufacturers have scaled back their electrification plans. Volvo, the Swedish automaker, abandoned its goal of achieving full electrification by 2030 earlier this month. Carlo Franchini, Head of Bank Ifigest's institutional clients, said: "For electric cars, you need to address the basics, starting with power generation and a viable system for this project." "It's not yet a good bet for the auto industry. Reducing exposure is not a bad idea."

There are also risks in exiting electrification. Luca de Meo, CEO of Renault, recently warned that European automakers who exceed the EU's carbon emission limits in 2025 could face fines of nearly $20 billion due to the slowdown in electric car demand.

Chiara Robba, Head of Generali Asset Management's LDI stocks, said: "It's hard to say if the negative news about the European auto industry has bottomed out. Even with attractive valuations, it could still be a value trap without a recovery." "The industry needs comprehensive support for supply chain, manufacturing, and charging infrastructure in order to help improve demand for electric cars."