Auto & Transport Update: Industry Insights

Latest Market Updates focusing on the Automotive and Transportation industry. Available only on Dow Jones Newswires at 4:20 AM EST, 12:20 PM EST, and 4:50 PM EST.

1106 ET – According to Nord/LB analysts, the U.S.-EU trade deal holds significance for European businesses, particularly those in Germany, when considering long-term strategies. They mention in their report that the risk of increased tensions as of August 1 has been temporarily set aside, although certain uncertainties still linger and some lingering doubts continue. Still, this development represents a key move towards restoring stability between the Atlantic partners. Although current duties on steel and aluminum at 50% stay unchanged, the pact ensures that the automotive sector—which now faces a 15% tariff instead of 25%—won’t lag further behind global competitors such as Japan, according to the analysts. (edward.frankl@wsj.com)

0957 ET - European automotive stocks reversed initial gains and ended up in negative territory during the afternoon trading session. The sector began the day positively following an agreement between the US and EU regarding a trade deal that prevented further intensification of trade disputes. Analysts from Barclays, Henning Cosman and Erwann Dagorne, mentioned in their report that they believe current earnings estimates should largely account for approximately 15% already. They also noted that due to challenges faced by most automobile producers in achieving growth, there might not be significant upward adjustments to these forecasts because of this agreement. Furthermore, according to them, the Stoxx Europe 600 Automobiles & Parts Index has become more susceptible since the potential for increased value has been eliminated. Both Porsche and Volkswagen stock prices dropped more than 2.9%, while Mercedes-Benz fell by 2.3%, Stellantis declined by 1.6%, and BMW was down 1.4%. (dominic.chopping@wsj.com)

0801 ET – According to Bank of America, the new EU-US trade deal leads to reduced car tariffs on imports to the US, dropping from 27.5% to 15%. This is seen as a positive development but not unexpected, particularly after the latest US-Japan arrangement. What matters more than the deal itself—something the bank notes was largely anticipated—is whether additional support will come for the automotive sector. BMW's chief executive has proposed that the EU lower its import tax on American-made cars to 0% from the current 10%, offering substantial benefits to BMW and Mercedes, both of whom manufacture certain models in the US for sale in Europe. Meanwhile, Volkswagen’s leader is seeking a particular pact that considers potential investment plans the firm may have in the US. (dominic.chopping@wsj.com)

0514 ET – According to Rella Suskin, an equity analyst at Morningstar, Porsche, Mercedes, BMW, and Volkswagen will see the greatest benefits from the U.S.-EU trade agreement because they import more products from Europe into the U.S. compared to those coming from Mexico and/or Canada. Stellantis only brings in a low-single digit percentage of its sales volume from the EU for the American market, so it likely won’t gain much advantage, according to Suskin. Although Ferrari sources all of its cars sold in the U.S. from Europe, its finances weren't significantly impacted by tariffs. The stock market may have already accounted for reduced tariff burdens on BMW, Volkswagen, and Ferrari, especially following the recent Japan-U.S. trade deal. Meanwhile, shares of Mercedes, Porsche, and Stellantis are performing poorly due to internal corporate strategies, notes Suskin. (dominic.chopping@wsj.com)

0507 ET - A trade agreement between Japan and the U.S. might provide temporary support to the yen, according to Eastspring Investments in a report. "This deal has reduced previous worries about high tariffs—especially those affecting automobiles—and has placed Japan in a favorable position as a U.S. trading ally." More certainty surrounding these terms could lead to short-term benefits for the yen because it increases the chances of an early interest rate hike from the Bank of Japan, notes Prudential's investment division. The BOJ had previously hesitated due to uncertainties related to trade and the economy; thus, clearer tariff policies should ease some of this hesitation. Nonetheless, ongoing political instability is expected to prevent significant gains in the yen's value, they mention. (tracy.qu@wsj.com)

0505 ET – According to Morgan Stanley analysts Ross Law and Marie-Ange Riggio, defense firms in the European Union, which saw their stocks drop early Monday, require more transparency regarding an agreement allowing the EU to purchase American military hardware as part of the broader trade accord between the two regions. A major uncertainty remains about how much and when the EU might acquire US-made arms, they highlight. U.S. President Donald Trump has indicated these deals could reach "hundreds of billions of dollars." Additional key issues needing clarification involve the specific types of equipment involved and whether the purchases will be new acquisitions or include outstanding orders from EU buyers who have yet to receive goods from American defense contractors, according to the analysts. They also mention that EU-based defense companies may face short-term challenges due to concerns over ongoing dependence on U.S. military supplies. (cristina.gallardo@wsj.com)

0502 ET – In a research report, Jefferies analysts noted that Forvia delivered solid performance despite challenging conditions. The French automotive parts manufacturer reported sales consistent with market forecasts and operating profits exceeding expectations, driven by growth in the electronics and seating divisions, according to the analysts. The firm confirmed its previous outlook. Several strategic announcements are expected, such as an update on the investor relations event, potentially offering insight into when asset divestitures may occur, the analysts added. The stock rose 11.9% to 11.50 euros. (nina.kienle@wsj.com)

0500 ET – According to Keefe, Bruyette & Woods, the likelihood of the U.K.’s financial leader reversing the Supreme Court decision regarding the auto loan investigation to shield vulnerable banks is minimal. This comes following reports indicating the Treasury might consider such action. The court’s verdict on whether fees charged on vehicle financing were legal will be announced this Friday. Those who stand to benefit include Lloyds Banking Group, Close Brothers, Santander UK, and Bank of Ireland. "Although it may seem appealing, we think the chance of such interference is very low and would represent an unusual move for any administration within a democratic society," analysts Edward Firth and Elise Yu Ge state. They argue it seems nearly impossible for the government to intervene at this stage and alter the legislation to restrict plaintiffs from receiving their legitimate compensation. (elena.vardon@wsj.com)

0440 ET – The U.S.-EU trade accord prevents further tensions, yet the 15% tax could result in billions lost each year for Germany’s auto sector, according to Hildegard Müller, head of the German Association of the Automotive Industry (VDA). "The key now lies in how this agreement will take shape practically and how dependable it proves to be," she states. Given significant future investments planned in the U.S., the VDA urges the EU to quickly enhance the environment in Europe so that it remains appealing for investors and businesses, Müller mentions. Europe must regain appeal and significance as a place for investment, she emphasizes. Additionally, automobile supply networks require improvement after being disrupted by the tariff conflict, Müller points out. (dominic.chopping@wsj.com)

0440 ET – On Monday morning, before regular trading began, Tesla stock rose slightly following comments from President Trump about reaching a trade deal with the European Union. Trump mentioned that the U.S. will establish a base tariff of 15% on European products, including cars. Previously, Washington imposed a 10% basic tax on most goods coming from the EU into the U.S., along with a 25% duty on its automotive sector. As of early Monday, Tesla’s share price increased by 1.8%, reaching $321.68. The firm operates a plant in Germany where it manufactures hundreds of thousands of Model Y models and millions of battery units. (mauro.orru@wsj.com)

0437 ET – Many European defense shares declined following the announcement of a trade agreement between the U.S. and the European Union. Thales in France dropped 3.5%, while Germany’s Renk Group fell 2.7% and Sweden’s Saab decreased by 2.3%. Rheinmetall, a major arms producer in Europe, saw a decline of 1.6%. German company Hensoldt, which provides sensors, lost 2.5%, Italy’s Leonardo slipped 1.2%, and Spain’s Indra Sistemas went down 1.95%. Defense firms based in Britain, even though not within the EU, also experienced losses, including Babcock International dropping 1.4%, BAE Systems declining 0.6%, and QinetiQ decreasing by 0.4%. On the positive side, French aerospace manufacturer Dassault Aviation rose 1.9%. Some EU-based companies that operate in the U.S. had earlier indicated they expected minimal effects from potential tariffs. Nevertheless, under this new trade accord, the EU committed to purchasing additional American weaponry, posing challenges for the region's attempts to develop an independent defense sector. (cristina.gallardo@wsj.com)