Jefferies has revised its stance on two leading European automakers, assigning a more favourable outlook to Renault and stepping back on Mercedes-Benz amid what it describes as diverging prospects across the sector.
For Renault, the brokerage upgraded the stock from "hold" to "buy" and increased its price target to 34 from 30, a level that implies roughly 18% upside relative to the close on November 9. Jefferies also raised its 2026 adjusted EBIT forecast by 9% to 3.3 billion, which it frames as a 5.3% margin. The firm said Renault remains on track to meet guidance of around a 5.5% margin and to generate approximately 1 billion in free cash flow.
Jefferies highlighted several strategic advantages it believes Renault possesses as it heads into 2027. The brokerage said Renault has "more levers to pull than many peers in 2027." Those levers include limited direct exposure to China, potential upside from European policy measures that support local manufacturing and smaller vehicles, and better profitability prospects from the company's second-generation electric vehicles. Jefferies also sees possible new third-party contracts for the Horse powertrain joint venture and the potential for value to be realised from Renault's stake in Nissan.
Despite the positive near-term view, Jefferies expects Renault's adjusted EBIT margin to compress to 4.4% in 2027 from 5.3% this year, citing ongoing material cost inflation and heightened competitive pressure as the drivers of that deterioration.
By contrast, the brokerage took a more cautious view of Mercedes-Benz, cutting its rating from "buy" to "hold" and trimming the price target to 44 from 46, leaving an estimated 5% upside. Jefferies reduced its 2027 adjusted EBIT forecast for Mercedes-Benz by about 15% to 5.6 billion and projects free cash flow of 2.9 billion.
Jefferies identified China as the primary concern for Mercedes-Benz. It estimates that operations in China contributed only around one percentage point to group margins in the third quarter. The brokerage warned that Chinese manufacturers are likely to increase pricing pressure in Europe and, indirectly, in the U.S., which could weigh on Mercedes-Benz's pricing power and margin recovery. While Jefferies acknowledged that Mercedes' cash returns remain sizeable, it added that the company's cash profile is "no longer differentiated" from peers.
This repositioning by Jefferies underscores how different business exposures and strategic options are shaping analyst expectations across the European auto sector. Investors and market participants will be watching both companies' execution on the pathways Jefferies laid out, as well as the broader competitive dynamics originating in China and spreading into other markets.