Bank of America has revised its ratings on several major European carmakers, cutting Stellantis to Underperform from Neutral and lowering its price objective to 225 from 22.5, while downgrading Renault to Neutral. The changes reflect what the bank describes as mounting competition from Chinese automobile manufacturers across the European market.
In its analysis, the bank highlights that Chinese brands have expanded their share of the European market to about 8%, roughly double previous levels. First-quarter sales for those brands rose by about 100% year-over-year. Names cited include BYD, SAIC/MG, Chery and Leapmotor, which are increasingly entering segments beyond premium electric vehicles - such as compact cars, SUVs and family-oriented models - where incumbents like Renault, Stellantis and Volkswagen have traditionally been strong.
Bank of America pointed to fuel efficiency and ownership economics as structural drivers helping electrified vehicles. The bank noted that energy accounts for about 12% of total cost of ownership for battery electric vehicles compared with around 26% for internal combustion engine vehicles, a dynamic that keeps battery EVs advantaged as pump prices remain structurally high in Europe.
The bank also flagged a strategic shift among Chinese manufacturers toward local production in Europe. Citing projections from S&P, it said roughly 25% of Chinese-made volumes could be produced locally by 2028, rising to about 32% by 2030. Local manufacturing is identified as a way to lower tariff exposure and improve political acceptance in European markets.
Specific forecasts for Stellantis issued by the bank indicate adjusted operating income margins of 2.9% and 3.2% for fiscal 2027 and 2028, respectively, which sit below consensus estimates of 3.6% and 4.5%. The bank said visible first-quarter reset benefits have not yet proven that a broader turnaround is locked in.
Renault, the bank said, faces margin pressure stemming from its electric-vehicle mix, partner sales and raw-materials costs, while its heavy exposure to the European market and to B-segment vehicles leaves it vulnerable to pricing pressure from Chinese entrants.
By contrast, Bank of America maintained its Buy rating on Volkswagen but reduced price targets to 2 9 on preferred shares and 205 on ordinary shares, noting the shares trade at about four to five times forward price-to-earnings.
Market context
The bank2s moves signal investor concern about margin and competitive dynamics across the European auto sector as lower-cost and rapidly scaling Chinese competitors expand product range and manufacturing footprints.