UBS Raises Price Targets
for EU Auto Stocks on Production Surge

European automakers secure higher valuations as global vehicle production forecast reaches 90.4 million units for 2025

Key Takeaways

• UBS raises European auto price targets by up to 15% as lower-than-expected U.S. tariff impact and improved global vehicle production trends boost sector outlook.
• Global light vehicle production forecast increased to 90.4 million units for 2025 representing a 3% upward revision as automakers adapt to new tariff environment through exemptions and limited price hikes.
• BMW leads upgrades with €90 price target while Stellantis and Volkswagen also see increased targets as European automakers demonstrate resilience against trade headwinds.

Introduction

UBS has upgraded price targets and earnings forecasts across European automotive stocks, signaling renewed confidence in the sector’s ability to weather U.S. trade tensions. The investment bank cites better-than-anticipated tariff impacts and strengthening global vehicle production trends as key drivers behind the optimistic revision.

The upgrades come as automakers demonstrate greater resilience than previously expected. European auto stocks benefit from strategic adaptations including supply chain restructuring and leveraging trade exemptions to minimize tariff exposure.

Key Developments

UBS increased its 2025 global light vehicle production forecast by 3% to 90.4 million units and raised its 2026 estimate by 2% to 90.9 million units. The revisions reflect automakers’ successful adaptation to the new tariff environment, particularly in the U.S. and China markets.

BMW receives the most substantial upgrade, with UBS raising its price target 15% to €90 from €78. The German automaker’s 2025 automotive EBIT is projected at €6.4 billion, with industrial free cash flow expected to reach €4.8 billion.

Volkswagen and Stellantis also benefit from increased price targets, moving to €92 and €9.7 respectively. Forvia experiences a significant target increase to €9 from €6.5, reflecting substantial earnings estimate upgrades across the supplier segment.

Market Impact

European automotive stocks gain momentum as the pan-European Stoxx 600 climbs more than 7% in 2025, outpacing the S&P 500’s 1.9% gain. Analysts attribute this performance to European names trading at relatively cheaper valuations compared to American counterparts.

BMW’s earnings per share projections see substantial increases, with 2025 EPS rising 6% to €9.86 and 2027 EPS jumping 16% to €12.61. Stellantis’ 2025 EPS forecast increases by 22%, while Forvia’s estimate shifts from a €0.25 loss to a €0.10 profit.

However, tire manufacturers face headwinds as Chinese tire imports surge 20-40% above average levels, causing retail prices to plummet over 10% quarter-on-quarter. Companies like Michelin and Pirelli face potential downgrades of up to 5%.

Strategic Insights

The automotive sector demonstrates strategic flexibility through supply chain restructuring and increased domestic content requirements. Vehicles with at least 85% domestic content can avoid tariffs, incentivizing further localization and supply chain agility.

European automakers benefit from their position as the world’s largest automotive export region, accounting for nearly 25% of global exports worth approximately $300 billion annually. The new U.S. tariffs affect roughly 50% of the U.S. auto market, but exemptions and credits help cushion the impact.

Original equipment manufacturers anticipate EBIT margin guidance adjustments, with UBS forecasting cuts of 150-200 basis points at Mercedes-Benz, Porsche AG, Stellantis, and Volkswagen. Renault expects to maintain its >7% EBIT margin, excluding CO₂ penalty considerations.

Expert Opinions and Data

According to Investing.com, UBS analysts note that enhanced volume trends in key markets like the U.S. and China support the upgraded forecasts. The bank maintains BMW as its preferred choice among European automakers due to its product cycle and improving cash flow trajectory.

Russ Mould from AJ Bell describes the market sell-off following Trump’s “Liberation Day” tariffs as brutal, noting fears of corporate earnings hits and economic slowdowns. The S&P 500 shed more than 10% following the announcement, while Asian markets experienced dramatic falls.

Jason Hollands at Evelyn Partners emphasizes the significant impact of tariffs on global trade, describing them as raising costs for consumers and potentially triggering recessions. Major firms like Apple and Tesla face production challenges due to manufacturing ties in tariff-affected countries.

UBS forecasts BMW to maintain a Q2 auto EBIT margin of 5%, aligning with the lower end of its yearly 5-7% guidance. For automotive suppliers, the bank predicts earnings will meet or surpass expectations due to favorable global volumes, though cost pressures from U.S. content sourcing may limit growth.

Conclusion

UBS’s upgraded targets reflect the European automotive sector’s demonstrated ability to adapt to trade challenges through strategic supply chain management and technological innovation. The revisions signal investor confidence in automakers’ operational efficiency and resilience against geopolitical headwinds.

The sector benefits from policy changes including German government reforms and potential NATO spending increases. European firms with limited tariff exposure and solid pricing power, particularly in telecommunications, utilities, and healthcare, position themselves to capitalize on current market conditions while maintaining growth trajectories.