BofA Securities on Monday reduced its view on Stellantis NV to "underperform" from "neutral" and cut the company price objective to c5.5 from c7.5. The firm also downgraded Renault SA to "neutral" from "buy," lowering its price objective to c33 from c36. The moves follow a sharp uptick in the presence of Chinese automakers across Europe.
Chinese brands roughly doubled their share of European new-vehicle sales to around 8% in March 2026, up from about 4% in the same month a year earlier, BofA said. Sales of Chinese-made vehicles in Europe grew by about 100% year-on-year in the first quarter of 2026 to approximately 300,000 units, led by BYD, SAIC/MG, Chery and Leapmotor.
Price competitiveness from Chinese entrants is notable, the note added. BYD, Chery and Leapmotor are offering battery electric vehicles at roughly 5% lower prices than European rivals for comparable range. Meanwhile, plug-in hybrid models from those makers are about 30% cheaper and deliver around 10% more electric range than comparable European offerings.
On Stellantis, BofA laid out a weaker margin outlook than consensus. The bank projects adjusted operating income margins of 2.9% for 2027 and 3.2% for 2028, versus consensus expectations of 3.6% and 4.5% for the same years. Europe, which accounted for nearly 47% of group shipments in the first quarter of 2026, produced only c8 million in adjusted operating income in Q1 2026 on a 0.1% margin.
Industrial free cash flow at Stellantis remained negative, at c1.9 billion in Q1 2026. The report also noted that the U.S. business recovery is closely tied to a heavy V8 mix, with HEMI powertrains making up about 40% of Ram pickup deliveries in the first quarter.
BofA commented on the forthcoming company strategy event, saying: "The CMD may bring restructuring, partnership or brand-portfolio headlines, but unless management provides a credible bridge to sustainable margins and cash generation, this is unlikely to be enough to justify the current recovery premium."
For Renault, BofA's forecasts fall short of company guidance. The bank expects an operating margin of roughly 4.75% for 2026, below Renault management guidance of around 5.5%. It also forecasts automotive free cash flow of about c800 million, under the company's target of more than c1 billion.
Raw material costs are expected to be a headwind for Renault in 2026 to the tune of approximately c600 million, which BofA said is roughly twice the positive impact the company experienced in 2025. Geographically, around 70% of Renault's group unit sales are generated in Western and Central Europe, and the B-segment vehicles including the Clio and Dacia models make up about 45% of group volumes.
Volkswagen was left with a "buy" rating from BofA, but the bank trimmed price targets to c99 for preference shares and c105 for ordinary shares from prior targets of c115 and c122 respectively. BofA noted Volkswagen trades at approximately 4-5x 12-month forward price-to-earnings and observed that "VW's Porsche AG and Traton stakes broadly match VW's current market value, leaving the operating business implicitly valued close to zero."
BofA also referenced S&P Global forecasts indicating locally produced volumes by Chinese automakers in Europe could reach about 25% by 2028 and rise to around 32% by 2030, a set of figures that BofA described as potentially conservative. Manufacturing investments by Chinese carmakers are already visible: BYD is building plants in Hungary and Turkey with initial capacity of 150,000 units per year each, and Leapmotor is expected to use Stellantis capacity in Spain beginning in 2026.
The broader battery electric vehicle landscape in Europe is shifting as well. BEV market share in Europe reached 19.4% in Q1 2026 compared with 15.2% in Q1 2025. BofA projects full-year BEV penetration for the EU28 to rise to about 24% in 2026 from 18.3% in 2025.
What this means
- The BofA note signals heightened competitive pressure from lower-priced, higher-range Chinese BEVs and PHEVs across European markets.
- Stellantis faces near-term margin and cash-flow challenges in Europe despite large shipment shares, while Renault may miss company guidance on margins and free cash flow.
- Volkswagen remains favored by BofA but with a lower valuation runway given its holdings of Porsche AG and Traton relative to market value.