e It was the German afternoon on Friday afternoon, when the 45th President of the United States was doing his favorite thing in faraway Washington: Donald Trump tweeted. His message moved – as the President likes it – immediately the stock exchanges. In Germany, shortly before the market closed, the prices of German automakers Daimler, Volkswagen and BMW came under pressure. Trump had threatened by tweet to impose higher tariffs on cars from the European Union, if the EU does not soon lift their trade barriers for American products.
Editor in the section “Money & More” of the Frankfurter Allgemeine Sonntagszeitung.
This is, as is often the case with Trump, an unusual way of looking at it in a friendly way. Because of the tariff dispute had started the American president in person. In early June, he had higher duties on steel and aluminum from the EU What caused the Europeans to react in a counter-reaction: since last Friday, uranium-based products such as Levi’s jeans and bourbon whiskey are also subject to higher tariffs when they are exported to Europe.
Whereupon Trump saw to his car-tweet. The automakers should not care who has responded to whom here. The fact is that Trumps Twitterei has made an even weaker week out of a for the manufacturers already weak stock exchange week. Because the stock prices had already fallen before.
On Monday, Audi boss Rupert Stadler was arrested, which has a negative impact on the course of the Audi parent company VW affected. On Wednesday evening, then, the Daimler Group had given a so-called profit warning completely unexpected and for the first time in six years. The profit will, unlike announced, this year not rise, but probably decline.
Shares have lost significantly since the beginning of the year
Donald Trump is, in a way, also responsible for this message: The President has also imposed punitive tariffs on China, to which China has responded with import duties on American goods. Ironically, these include, in particular, the cars of two German manufacturers who have their own plants in America and export their vehicles from there to China, Daimler and BMW , Reason enough for the Daimler Group to warn of a decline in profits – even if analysts believe that the Group uses the tariff dispute a little as an excuse for its own weaknesses.
Is it wise to rely on auto stocks, especially German ones, at such times? The Daimler share is popular among private investors and has been one of the most popular German stocks for years. However, given the recent stock market development, one could conclude that now is the time to sell German auto stocks. The course of Daimler has lost 19 percent since the beginning of the year, VW comes to 10 percent loss and BMW to about 7 percent. If you approach the matter soberly, you will notice that at the moment so much is in favor of auto stocks as it has not been for a long time. But there is, that is the good news, in spite of all a few arguments in favor.
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To start with the bad news, sufficient in Germany a term, the diesel scandal. After VW is now also affected Daimler: recall of cars, improper shutdown devices, plaintiffs shareholders – nothing is left out. Now, the example of VW shows that even under such adverse conditions on the stock market, not everything has to be lost. But a burden is the diesel scandal anyway.
Attractive price-earnings ratio
But it would be worse if Trump realizes his threat and raises tariffs on German cars. “We expect for this case with a profit loss of altogether 6 billion euro for the entire German automobile industry”, says Arndt Ellinghorst of the analysis house Evercore ISI. The trade war Donald Trump unleashed hits the German manufacturer’s business model:
Globalization is in its purest form at many places around the world, which are then assembled into cars in other parts of the world, which in turn are exported all over the world. If this is at stake, the manufacturers have nothing to laugh about. At best, a company like Peugeot, which produces largely in Europe and rarely sells cars outside Europe, can hope to not feel the effects of this.
Despite all this bad news, Evercore analyst Ellinghorst recommends brave investors buy the shares of German manufacturers. He says: “German auto stocks are among the largest public companies among the cheapest stocks in the world.” This can be read on the price-earnings ratio (P / E), an important indicator for the price of a share: VW and Daimler about 6, at BMW 7. In other words: The shares are incredibly cheap.
This could now be interpreted as a sign of the approaching demise of German automakers. Or as a unique entry opportunity. After all, the companies are doing really well: they all started the year with record profits. Of course, given all the uncertainties, investors will need a long breath. It can take several years for the investment to pay off. But here is the old saying: Who does not dare, who does not win.