The plight of auto stocks is more than just a snapshot. BMW, Mercedes and VW have long been wallflowers on the stock market. This can be seen in the chronically weak price-earnings ratio (P/E) of auto stocks, which relates the share price to the expected annual profit. A high P/E ratio reflects that investors have confidence in a company for future growth and increasing profits. But with a current P/E ratio of 3.2, VW ranks far down in the Dax, Mercedes and BMW are only slightly better. There are good reasons for this. Firstly, significantly fewer cars are being bought in the world than before. In China, too, the boom years with high market growth are over. Secondly, German car manufacturers still make most of their money with cars that have a combustion engine under the hood. But according to forecasts, their sales figures could more than halve worldwide by the middle of the next decade. In the long term, the future belongs primarily to the electric car and there are strong new competitors with manufacturers like BYD and Tesla. How successful BMW, Mercedes and VW can be in the era of digitalized and electric cars will only become clear in a few years , because the car revolution has only just begun. However, one thing is becoming apparent: the importance and market position of the three German car companies will no longer be as strong as before due to new competition. Neither of these things speaks for buying German car stocks now – even if they seem particularly cheap.
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