Auto shares trade at 60 discount to wider market
Industry hit by slowdown, China competition
Sector earnings seen falling more than 13 in 2024
EU car sales plunged over 18 in August

Sept 20 Reuters European auto stocks are so unpopular right now that investors keep reducing their exposure even as the scale of the industry39;s problems has driven valuations close to record lows, which would normally be a big incentive for wouldbe buyers.

The STOXX 600 Autos and Parts index is among this year39;s worst performers. Analysts predict a 13.6 earnings drop in 2024, a reversal from the years immediately after the pandemic, when supply chain snags handed carmakers licence to raise prices.

Investors believe large cost cuts are becoming unavoidable in a downturn driven by a complex technological shift, fierce competition from Chinese newcomers, and increasingly priceconscious consumers.

They say economies of scale are key, especially for massmarket brands like Germany39;s Volkswagen, which is clashing with trade unions over unprecedented plans to shut factories on its home turf, due in part to the Chinese competition and rising labour and energy costs.

European autos now trade at a nearrecord 60 discount to the wider market represented by the panEuropean STOXX 600 index on a pricetoearnings basis. Still, a BofA survey this month showed autos are the most underweighted sector among regional fund managers overseeing 284 billion.

This toxic cocktail that you have weakness…