We remain positive on European autos, even though risks have increased recently due to the on-going weakness of some emerging market currencies. Every phase of weakness also offers new buying opportunities. The main reason why we remain optimistic is the expected upturn in Europe in 2014e as well as the high number of model launches at some car makers, such as Daimler, BMW and Peugeot. In turn, we think car makers with relatively few model launches, such as Volkswagen and Renault, will not benefit much from a further sector re-rating. In our view, the main downside risk in 2014 is lower-than-expected volume growth in those emerging markets where currencies weakened substantially in H2 2013. This is a particular risk for European mass market car makers (eg Renault), whereas German premium car makers – especially BMW – are likely to be less affected.
* Theme No. 1: Model launch momentum – we highlight Daimler and BMW; we are less positive on VW
* Theme No. 2: Sector revaluation unlikely near-term, but it can continue for companies with a low risk profile– we highlight BMW
* Theme No. 3: European recovery versus growing problems in emerging markets (except China)