LIVE MARKETS-Carmaggedon leaves auto parts suppliers down but not out

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CARMAGGEDON LEAVES AUTO PARTS SUPPLIERS DOWN BUT NOT OUT

Europe's auto parts suppliers are "down but not out" despite tariffs, according to Barclays, with encouraging signs of earnings and cash resilience, and healthy liquidity levels.

Trump's tariff-related "carmaggedon" has had a huge impact on the sector, not only the reciprocal tariff plan (announced on April 2), but the U.S. tariff auto day on March 26.

This added "substantial global macro deterioration risks on top of sector-specific headwinds," Barclays says.

"Fast forward to today, the damage is now done and the sub-sector has been biting the bullet since then but it is only down, not out, in our view."

Stocks in the sector are mixed year-to-date.

Gestamp and Continental are slightly higher, while Michelin and Valeo are slightly lower. Forvia is down 21% in 225 so far.

But, things have improved in recent weeks on Trump's softening stance on reciprocal tariffs and a potential exemption on USMCA-compliant components.

"We strongly believe peak uncertainty has passed," Barclays adds.

"With valuation still appearing to be at rock bottom, we continue to see a positive - albeit selective - risk/reward set-up for EU suppliers," they add.

The firm continues to see Continental and Forvia (both rated overweight) as offering better risk/reward set-up than Valeo (equal weight) and Michelin (underweight).

(Samuel Indyk)

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