Porsche/BMW Stock: My Exit From The German Automobile Industry

Sad but true: I'm a European investor, but for the first time ever I don't own any shares in European industrial companies.

For the first time in over 35 years, I no longer own a single European industrial stock. I have been invested in the automotive industry for many years, but last week I sold all the remaining stocks of BMW, Porsche Holding and Porsche AG from the portfolios I manage.

On the one hand, this is sad, but on the other hand, it is liberating. I am actually a relatively hard-boiled anti-cyclicist and rarely get caught up in general panic. But the storm that is currently brewing for the general European industry, and the German car manufacturers in particular, could end up as a deadly thunderstorm.

My Latest Experience Of Buying A Car

My investment decisions are often influenced by personal experiences, as Peter Lynch also advocated. This is no exception:

For the past two years, I have been not only a Porsche shareholder, but also a proud owner of an all-electric Porsche Taycan 4 Cross Turismo. I have never been a big car lover and I still am not, but I have been driving for over 35 years and ever since I drove my cherry-red Volkswagen as a student, I have never loved a car as much as I love my Porsche Taycan.

I love the driving experience of this new electric car, which sometimes reminds me more of a spaceship than a car. This dream car is absolutely suitable for an everyday use with my family. Its range is 400 km in summer (only 300 km in winter), but for the daily use this is not a problem at all, especially since I have a wall box at home and fast charging at 250 kW on the autobahn really doesn't take longer than enjoying a coffee at a gas station.

After the warranty expired, I recently thought about "updating" my Porsche Taycan. I would have been willing to pay a lot of money for a brand new Taycan to have the latest electric car technology. Shockingly, I had to realize that my "old" low mileage Taycan has lost about 50% of its value in two years. Of course, an "update" is not an option at this price in this point in time. After all, the high resale value has traditionally been part of what makes Porsche so attractive.

A short market research showed: This is actually not even a Porsche-specific problem, but the market for used e-cars has completely collapsed, at least in Germany. I claim: There is currently no functioning pre-owned market for luxury e-cars in Germany.

I am an absolute supporter of e-mobility, but based on this experience, my family and I have decided that we will not be adding another e-car to our fleet. Instead, we got another (I think for the last time) classic internal combustion engine car. These cars are also under a tremendous price pressure right now. We bought a one year old car from the Stellantis group, which after 12 months and only 6,000 km on the clock is being traded at over 35% below list price, despite excellent equipment.

After this experience, I asked myself once again if I wanted to continue to be an investor in this industry. In other words, would I be willing to boldly buy more stocks of these automobile companies if prices continue to fall, as I usually do when I take book losses on my high-conviction investments?

Unfortunately, my answer to that question is not a resounding yes. I am not sure whether the German industry is adaptive enough to survive this crisis, or whether we will indeed lose our "favorite child" in my home country.

I could write a long article with many arguments, from the collapsing Chinese market to new Asian competitors to the looming tariffs of the new Trump administration. Instead, I'll keep it simple today. The esteemed German value investor Helmut Fink also contributed to my decision the other week with a great blog post that I would like to recommend to all of you:

The Car - Are We Losing Our "Favorite Child"?
(unfortunately only published in German)

This article analyzes the transformation of transportation, in particular the impact of electric mobility and autonomous driving on the automotive industry. Helmut compares the current situation with the transformation in the early 20th century, when the car replaced the horse-drawn carriage, and uses the S-curve model to show that change usually occurs in three phases: a slow adaptation phase, followed by a rapid increase, and finally saturation.

The article argues that we are currently in the rapid increase phase of electric mobility. Helmut predicts that electric vehicles will almost completely replace internal combustion engines in the coming years. However, the overall car market is expected to decline sharply over the next few years as customers postpone their purchase decisions due to the so called Osborne effect.

Furthermore, the automotive industry will come under additional pressure from the second transformation, autonomous driving. Helmut is convinced that, despite the current challenges, autonomous driving will become a reality in the future. With the advent of Transport as a Service (TaaS), the cost of mobility will drop significantly and car ownership will become unattractive for many people.

Under these circumstances, Helmut clearly advises against investing in automotive stocks. He cites the expected collapse of the automobile market in the coming years. In his opinion, the transition to electric mobility and autonomous driving is a "sword of Damocles" hanging over any investment in a car manufacturer. He argues that the risk of the market collapsing is too great, even with seemingly cheap valuations - as we are undoubtedly experiencing at the moment.

And unfortunately, I can't disagree with him.

Consequently, the only decision I could make was to sell the automotive stocks entirely. From now on, I will follow the development of the German industry only from the perspective of a taxpayer, and no longer as a shareholder.

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*Disclaimer

The author and/or related persons or companies do not own any stocks of any companies discussed in this article. This post is an expression of opinion and not investment advice.