Investing.com -- Redburn Atlantic downgraded both Stellantis (NYSE:STLA) and BMW (ETR:BMWG) to Neutral from Buy, a move driven by rising tariff-related uncertainty and cost pressure that could weigh on earnings despite strong company execution.
The brokerage revised its near-term view on the auto sector, warning that “production cuts and falling sales rates will likely follow U.S. auto tariffs,” and estimated total net tariff costs across covered OEMs at $19 billion.
Redburn analysts note that valuations do not yet reflect these risks and expect the auto sector to face earnings downgrades and guidance reductions in the coming quarters.
“Analysis of our coverage’s net tariff costs, totalling $19bn, points to underappreciated earnings downgrades. Valuations appear to minimally reflect such costs,” analysts said in a note.
For Stellantis, Redburn’s team said tariff-related instability slows down Stellantis’ turnaround.
“We downgrade Stellantis to Neutral until conditions improve for greater U.S. sales stability,” the note says, stressing that the automaker needs to appoint a CEO with solid strategic acumen, recover U.S. market share, raise European plant use, and “retain high margins in ‘third engine’ regions.”
“Despite considerable upside if risks subside, we now view more symmetry to the risks for the group’s growth and margin improvements through FY26,” the analysts added.
BMW was also downgraded to Neutral, with Redburn highlighting tariff burdens and lingering weakness in Chinese demand.
The group’s automotive margin for fiscal 2025 (FY25) is now modeled just below 4%, down from a previous 5-7% range, and Redburn cut its FY25 EBIT forecast by over 35%. “We now view these company-specific forces as outweighed by the earnings risks from U.S. tariffs,” the firm said.
Redburn acknowledged BMW’s flexibility in production and potential for share buybacks, but flagged €1 billion in tariff-related costs that could weigh on pre-tax profit. The new target price for BMW was reduced to €85 from €95, while Stellantis’ was cut to €10 from €16.
Despite some tactical efforts by automakers to manage tariffs—such as shifting production, clearing inventories, and raising prices—analysts warned that sustained policy uncertainty could continue to disrupt operations.
They expect P&L impacts to be most visible from Q3 onward, as current dealer inventories are drawn down and higher cost structures begin to flow through.
Redburn’s tariff scenario assumes six months of U.S. import duties before potential de-escalation. However, analysts warned that if tariffs stick for longer, further downside to FY25 earnings estimates is likely.