UBS says Europe’s autos sector faces growing pressure as the ongoing Middle East conflict feeds through into higher energy and input costs, more volatile supply chains and uncertainty around consumer demand. The broker notes that investor sentiment has already reflected these concerns, with the sector down roughly 10-15% since the conflict began.
Against this backdrop, UBS is prioritising individual companies where management actions or operational improvements could drive a recovery. The broker highlights two names in particular: Stellantis and Continental, each cited for distinct catalysts that underpin UBS’s constructive views.
Stellantis - North American turnaround in focus
UBS’s positive stance on Stellantis is largely grounded in what it sees as a turnaround opportunity in North America. The broker points to a pipeline of new product introductions and an improving vehicle mix as the primary drivers of a recovery in the region.
UBS quantifies potential upside from execution improvements at about 03 billion in adjusted operating income. The broker also identifies two near-term events that could act as catalysts for reappraisal by the market: upcoming company results and a capital markets day scheduled for May.
UBS cautions, however, that oil price developments represent a material risk to this scenario. If fuel costs remain elevated, consumer preferences in the U.S. could shift toward smaller vehicles that generally carry lower margins, potentially offsetting the benefits of Stellantis’s product improvements.
Continental - value unlocking via Contitech disposal
For Continental, UBS focuses on the planned disposal of the Contitech division as the principal corporate catalyst. The broker argues that selling Contitech could enable a significant return of capital, including a special dividend, and prompt a re-rating of the remaining business as a more focused tyre manufacturer.
UBS estimates this course of action could crystallise roughly 040-50 per share in value, which would help narrow an existing valuation gap versus peers and simplify the investment proposition by concentrating on core tyre operations.
UBS’s recommendations reflect a preference for companies with identifiable levers to restore profitability or unlock balance-sheet value, rather than broad exposure to an autos sector facing elevated cost and demand risks.