LIVE MARKETS-'Anything but autos': Carmakers seek new narrative beyond sector gloom
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'ANYTHING BUT AUTOS': CARMAKERS SEEK NEW NARRATIVE BEYOND SECTOR GLOOM
Reports that Volkswagen VOWG.DE is looking to produce missiles at its Osnabrueck plant may not move the shares quickly, but the idea could help shift the gloomy mood hanging over the sector, according to Citi.
The FT reported VW is discussing a deal with Israel’s Rafael Advanced Defence Systems, following similar moves elsewhere in Europe, including Renault’s RENA.PA plan to make military drones and Schaeffler’s SHA0n.DE recent push into humanoid robots.
Citi argues using redundant car plants for defence production could be cheaper than shutting them down, help preserve jobs and speed up Europe’s defence build-out. Any financial benefit may be modest, but the sentiment lift could matter.
“Re-deploying ANY automotive invested capital (or just cash) into potentially higher return, higher growth non-automotive business (popularly referred as ‘anything but auto’ narrative) could improve VW’s ROIC, and could add a positive narrative that the auto industry currently does not offer," writes Citi analyst Harald Hendrikse.
Political risks remain, especially around defence ties, but Citi sticks with a Buy rating, saying VW could climb a conflict-driven “wall of worry” after recent underperformance.
(Danilo Masoni)
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