BYDDY - Automakers likely driving toward overproduction - UBS

2023-04-05 11:46:25 ET

An analysis by UBS indicates that automakers could be headed for overproduction amid normalizing supply chains, reversing the trends that caused prices to soar in recent years.

The analysis offered by a team of analysts led by Patrick Hummel pointed to global production reaching 85.8M units in 2023, overshooting the team’s sales forecast of 81M units. As such, inventories are expected to exceed pre-pandemic volumes for the first time as demand slows and production bottlenecks are alleviated.

“OEMs argue with pent-up demand, but that expectation is not supported by latest macro trends. Given the bullish production schedules, we see high risk of overproduction and growing pricing pressure as a result,” the team told clients. “The price war has already started unfolding in the EV space, and we expect it to spread into the combustion engine segment in H2.”

That said, Hummel’s team expects luxury automakers to remain resilient, with Porsche AG ( OTCPK:DRPRF ) and Mercedes ( OTCPK:MBGAF ) recommended as Buy-rated names. The two were named “most preferred OEMs, next to Tesla ( NASDAQ: TSLA ),” by the team. Stellantis ( STLA ) -2.28% was cited as the only Buy-rated western mass OEM.

Major US automakers Ford ( F ) -2.67% , Tesla ( TSLA ) -4.12% and General Motors ( GM ) -2.99% declined sharply on Wednesday, joined by major Chinese EV manufacturers Nio ( NIO ) -3.47% , BYD Company ( OTCPK:BYDDY ) -1.97% , and Li Auto ( LI ) -2.33% . XPeng ( XPEV ) -0.88% marked a comparatively modest decline.

Other notable decliners on the day included Faraday Future Intelligent Electric ( FFIE ) -6.64% , Fisker ( FSR ) -4.15% , Lucid Group ( LCID ) -4.24% , Lordstown Motors ( RIDE ) -6.52%, Polestar ( PSNY ) -7.65% , Canoo ( GOEV ) -7.45% , Rivian Automotive ( RIVN ) -5.1% , Mullen Automotive ( MULN ) -2.1% , and Fisker ( FSR ) -4.57% .

Read more on recent EV delivery data .

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