Auto Sector Update : Global PV & CV refocus on ICE By Elara Capital
We have analyzed Q4CY24 results and guidance of key global auto PV and CV original equipment manufacturers (OEM), such as Tesla, Ford, General Motors (GM), Mercedes, Stellantis, Toyota, Suzuki, Hyundai, Volkswagen, BMW, Audi, Porsche, Volvo, Paccar, Daimler trucks to gain insight on the demand, profitability and electrification trends. The key takeaways are: 1) Most global OEM, especially the US, refocusing on the internal combustion engine (ICE) segment, 2) Global passenger vehicle (PV) OEM guided for flattish volume growth with Mercedes Benz (MB) contracting in the range of -2.0% and -7.5%; Porsche expects a slight dip while VW, BMW, Audi guided for a 0-5% volume growth (this assumes robust growth in the US, which could come under pressure based on tariff execution), 3) Legacy OEM expect market share pressure in China to persist in CY25 as meaningful BEV new launches for them are expected only from CY26, 4) Local for local capacities being talked about and some restructuring of high cost EU production, 5) Margin pressures to persist (even ex of tariffs) for most OEM in CY25, owing to continued pressure in China. BMW is the only OEM to include likely tariff impact of -1% in CY25 margin, and 6) Medium- and heavy-duty truck market to remain muted with -9% to +4% volume growth for North America and -2% to -14% for the EU as per Daimler trucks.
ICE – yet to meet its demise:. With expectations of reduced subsidy for EV in the US and extension of meeting carbon dioxide (C02) emission regulations in the EU, most OEM are refocused on their ICE product pipeline but still expect BEV penetration to increase. For eg, Ford has scrapped one of its EV projects and is focused on ICE & hybrid models. In its earnings call, Porsche says the company still sees EV as a future technology and wants to make it a success in the long term, but the goal of delivering more than 80% of EV by 2030 is “not realistic”. Also, Suzuki has reduced the number of EV models expected to 4 (from 6) and cut its long-term volume outlook for India to 2.54mn units from earlier 3.0mn units and expects EV share of 15%.
Muted CY25 guidance from PV and CV OEM: While MB and Porsche expect a slight dip in volume in CY25, BMW, VW, Audi have guided for a 0-5% volume growth. OEMs expect market share losses to continue in China as significant product launches are likely to happen only in CY26, which is also one of the reasons for muted EBIT margin guidance in CY25 (largely flat on an already reduced CY24). This was one of our key concern cited in our thematic note, China energizing seismic shifts released on 27 January 2025. This is also one of the reasons most EU OEM restructuring their European plants as historical profit pools in China are under severe stress. As per S&P Global Mobility’s February projections, global light vehicle production is likely to be flat in CY25. Region-wise, North America would dip by 1.4%, China would grow 2.6% while the EU is set to decline by 4.2% YoY. Separately, several global industry bodies also have set a flat to low single-digit sales growth guidance in CY25. Key CV OEM also targets flat volume to contraction in CY25.
Read through for India-listed companies under our coverage: Slowing global PV growth as well as shrinking profit pools of global OEMs in China, resulting in restructuring their EU operations, are cause for concern for SAMIL (reiterate Reduce). Some US OEMs are refocused on ICE models, which means the ICE product segment (Starter motor) for Sona BLW could see growth in the medium-term vs a structural decline expected earlier. Near-term refreshed model changeover for one key US EV OEM will be cause for concern in the short term. For JLR, China remains a concern, while the US and the EU are expected to benefit, owing to the premium brand strategy. We monitor its FY26 EBIT margin guidance expected during May-June 2025. Muted global CV demand will remain cause for concern for Bharat Forge while the EPA is reconsidering 2027 emissions regulations. This means pre-buying in CY26 may not happen and at the same time a big dip is also unlikely in CY27, thereby giving a more smoothened growth trajectory for the US Class 8 truck market.
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