EuropeEquityResearch28August2019GlobalAutosStateofthemarket:August'19EuropeanAutosJoseMAsumendiAC(44-20)7742-5315jose.m.asumendi@jpmorgan.comBloombergJPMAASUMENDIJ.P.MorganSecuritiesplcAkshatKacker(44-20)7134-6775akshat.kacker@jpmorgan.comJ.P.MorganSecuritiesplcSarthJPatel(91-22)6157-3735sarth.patel@jpmchase.comJ.P.MorganIndiaPrivateLimitedSeepage32foranalystcertificationandimportantdisclosures,includingnon-USanalystdisclosures.J.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.www.jpmorganmarkets.comHalfwaythroughQ3,weareseeingsustainedreductionsindemandlevelsacrosstheglobe.ChinaandEuropehavebeenthecoredriversofearningsdowngradesacrossthesectorandweareyettoseeaninflectionpointintheseendmarkets.Inreturn,OEMsandsuppliersareshiftingfocustodrivecostcontrolinitiativesandoptimizeproductioncapacityinthesustainedlowvolumeconditions.Asvariousmacrofactorscontinuetoweighondemand,welookatthestateofkeyendmarkets,i.e.China,Europe,NorthAmerica,BrazilandRussiainourAugustMarketupdate:OverallsalesmomentumoftheChinesecarmarketisdevelopingweakerthanexpected.Wholesaledemandisdown13%YTDcoupledwitha15%YTDcuttoproductionvolumes.Pricingpowerhasdeterioratedacrossthemarketandinventorylevelshavecontinuedtorise.OurhouseviewremainsthatapreviouslyexpectedinflectionpointinAugustmaybepushedbacktoQ4,asthelowbasekicksinandtheChinaVIpre-buyeffecteasesout–leadingtoalowsingle-digitrebound.Europeancardemand.InJuly’19,salesinthefivekeyWesternEuropean(WE)markets(~80%ofEU15+EFTAdemand)weredown5.3%y/y,drivenbySpain(-15%),UK(-8.3%),France(-6.1%)andItaly(-0.7%).SalesinGermanywereflaty/y.YeartoJuly’19,demandisestimatedtobedown3%y/yinWE.PricingpowerisshowingsignsofsequentialimprovementinJuly/Aug'19.OurAugustchannelchecksindicatea130bpssequentialdecreaseinincentivelevelsonaverageamon...
