Continued uncertainty over international trading conditions, profit warnings from two leading German automakers and the sudden death of a chief executive all contributed to declines seen in the latest Automotive News Europe/PricewaterhouseCoopers Transaction Services Shareholder Value Indices.
In the third quarter of this year BMW shed 0.3 percent of its value and Daimler 1.7 percent, while PSA Group surged ahead by 18.8 percent. Overall, automakers were up 2.2 percent in the second quarter, while suppliers lost 10.3 percent of their value and retailers 7.4 percent.
The small gain by automakers in Q3, which followed a drop of 10 percent in shareholder value in the preceding three months, masked significant differences in performance between individual companies. All six of the European automakers included in the index did better in Q3 than in Q2, with two recovering from negative to positive outcomes and three markedly slowing the rate of loss in shareholder value.
Once again, the best performance by far came from the French PSA Group, which includes Peugeot, Citroen, DS and most recently Opel/Vauxhall. The rescue plans introduced by CEO Carlos Tavares following heavy losses in 2014 has continued to deliver. In the first six months, lifted by strong sales of the Peugeot 3008 and 5008 SUVs, PSA revenues rose 40 percent to 39 billion euros, while net income was up 18 percent to 1.48 billion euros.
The operating margin on its French brands was 8.5 percent – well ahead of the target set in 2016 of 6 percent by 2021. And by applying a similar cost discipline at Opel/Vauxhall, which it acquired a year ago from General Motors, PSA has already brought what had been a persistent and heavy money loser back to profit with a 5 percent operating margin. Investors reacted favorably to this continued progress, with the group's shares reaching a 10-year high during Q3.
Other automakers, however, have not fared so well, with the possible effects of the growing international trade war continuing to create considerable uncertainty for the auto sector. This volatility is only partially reflected in the quarterly index. BMW's stock price, for example, which had started the year at 86.40 euros reached 96.26 euros by January 22. But by March 5 it had fallen back to 83.49 euros, recovered to 93.30 euros on May 17 and then slumped to a low for the year of 77.65 euros at the end June.
That volatility continued into Q3, exacerbated by a profit warning which caused investor concern across the whole auto sector. Having recovered from its late-June position to reach 85.77 euros by September 21, the stock lost 5 percent of its value in a single day in response to that warning and relinquished more ground as the quarter progressed. It finished the quarter virtually where it had started, at 77.71 euros, before falling further in early October to another new low for the year.
BMW told investors its 2018 revenues and profits would likely fall due to the costs of implementing new emissions standards in Europe and rising uncertainty stemming from the escalating global trade war. A significant proportion of its U.S. production is sold to China and will be affected by increased tariffs. BMW had already said 2018 would be challenging because of the more than 1 billion euros in investments it is making in mobility and to currency headwinds.
Daimler, too, which also sells cars produced in the U.S. into China, warned that the heightening trade war between the two countries could affect its profitability this year. It lost just 1.7 percent of value in Q3, having fallen 15.4 percent in the preceding three months.
However, another German automaker, VW, achieved a significant turnaround, turning an 11.2 percent drop in shareholder value in Q2 into a 4.9 percent gain in Q3. This was despite its stock having started the latest quarter at a year low of 141 euros and hitting a new low of 136 euros in early September before recovering strongly to 154 euros by the quarter end.