New car registrations in Europe dropped to a never-seen-before low point in August. This comes after registrations fell to a 20-year low in May 2013. The auto industry of Europe has been suffering through a dry spell for several quarters now. Despite growing signs of recovery in the Eurozone, sales of major car makers of Europe have slumped in this year.
It should be noted here that being the peak of summer holiday season, August is known as a weak month for auto sales anyway. Lower car sales in Europe is of interest to us because some big names in the hedge fund industry have maintained short and long positions in major European auto makers. However, the timing of these bets has had no luck until now; the most concentrated long, Volkswagen, has continued to show patchy stock performance. On the other hand, the most concentrated short bet, Peugeot, has witnessed the largest appreciation in share price for the year.
France and Spain show largest decline in sales
European Automobile Manufacturers Association, better known as ACEA, reports that car registrations fell by 5 percent in last month to 653,872 units on a year-over-year basis, wiping out an increase of 5 percent witnessed in July 2013. Yet again, the UK remained the only European country watched by ACEA that has shown an increase in sales. Sales in the UK were up 10.9 percent, Germany saw a decline of 5.5 percent, sales in Italy were down 6.6 percent, whereas France and Spain took the crown by reporting a 10.5 percent and 18.3 percent slump respectively.
Fiat, short bet of Jim Chanos, up 62 percent YTD
Marshall Wace and Jim Chanos have short positions in Fiat S.p.A. (OTCMKTS:FIATY), which has suffered a decline of 8.6 percent in car sales for the year. D.E.Shaw has covered its negative bet in Fiat. According to filings submitted to Italian authority, CONSOB, BlackRock, Vanguard Group and GMO have long positions in the maker of Ferrari. To date Fiat’s shares are up 62 percent, so shorts are really not doing well here.
Volkswagen, long holding of Chanos, Loeb, Odey
Another European major, Volkswagen AG (FRA:VOW) (ETR:VOW) (ETR:VOW3) has popped up in hedge fund long holdings. Hedge funds who are betting in favor of Volkswagen include Jim Chanos, Dan Loeb’s Third Point, Odey Asset Management, TT International and Bramshott European Fund. Volkswagen AG (FRA:VOW) (ETR:VOW) (ETR:VOW3)’s sales have declined 4.6 percent for the year. Shares of the Lamborghini maker were down 2 percent today and have gained 6.5 percent for the year. BG Master Fund has maintained a 0.8 percent short position in Volkswagen.
Peugeot-Citroen posts largest decline in sales for the year
Peugeot SA (EPA:UG) is the French maker of passenger cars and auto parts. The company’s main division, Peugeot-Citroen SA, posted the largest drop in sales at 17 percent in the last month; for the year sales are down 12.3 percent. Peugeot-Citroen SA also operates Faurecia SA (EPA:EO), its auto parts division. Both Peugeot and Faurecia have been seen in short position disclosures. Marshall Wace has a 0.8 percent short position in Peugeot; Odey Asset Management, Adage Capital, D.E. Shaw and Egerton Capital, have all bet against the company. Here again, shorts are getting thrashed as shares of the company are up 125 percent for the year.
B & G Master Fund has a 0.5 percent short in Faurecia SA (EPA:EO), AQR Capital has a 0.7 percent short in the company, whereas Highbridge Capital and BNP Paribas have covered their positions. In yesterday’s Value Investing Congress, Alex Roepers of Atlantic Investment pitched long in Faurecia. He said that deleveraging and improved operating margins will drive the stock higher, and estimated Faurecia’s value at 31 euros per share. Faurecia currently tardes around 21 euros, shares of Faurecia were down 2 percent today, but have gained 80 percent this year.
3-4 percent growth in European car industry in 2104: Citi
ACEA started recording new car registrations in 1990, so this is an all-time low number reported by the association, marring hopes of a continued recovery in the Eurozone. Just a week ago, Citi’s analyst Philip Watkins said in his note that European car market is stabilizing. Watkins said that the European car industry is expected to report a 3-4 percent growth in 2014. Watkins said that the slow sales witnessed globally are not representative of a trend. His note was based on the outlook of European autos all over the world and was not concentrating on sales in Europe only. Watkins said that weaker EM currencies should not be a problem for European auto industry.