Analysts flag weak demand, shifting spending across auto and transport sectors

NATO summit confirmed spending shift from land systems, analysts say

Analysts at Daiwa said Chinese automakers are likely to report relatively weak second-quarter results due to soft domestic demand and rising raw-material prices. BYD and Geely Automobile are expected to outperform traditional automakers on strong exports, the analysts said. NIO stands out due to its strong model cycle and better product mix, they added. An escalation in European Union trade barriers could pose risks, as the bloc plans to extend tariff hikes to imports of Chinese plug-in hybrids, the analysts said. Chinese automakers with manufacturing capacity in Europe are in a strong position for further market-share gains, they added.

In the airline sector, Bernstein analysts said easyJet’s current growth strategy is more likely to be maintained by Apollo than by Castlelake, supported by the asset manager’s experience investing in airlines. Apollo’s $7.64 billion takeover proposal has a strong chance of succeeding after easyJet’s board indicated it would be willing to recommend the offer, the analysts said. The main remaining hurdle is meeting European ownership requirements, but competition concerns look limited, they added. The offer price would require significant operational improvements or asset sales to justify the investment, according to Bernstein.

On German automakers, Bernstein analysts said Volkswagen shares will probably not react well to the company’s future plan released Thursday, calling it “long on ideals but very short on specifics.” Volkswagen said it will concentrate its model lineup on the most attractive market segments and streamline it by up to 50%, reducing complexity by up to 75%. The company also claimed it is extending its technology leadership, a claim that will likely raise eyebrows given the pace of innovation among its Chinese competitors, Bernstein added. Work Council leader Daniella Cavallo called for CEO Oliver Blume to make a statement about rumors of job cuts and plant closures, the note said.

Citi analysts said Stellantis’s U.S. sales performance in May and June was “very disappointing.” Headline monthly market share figures of 7.5% and 7.6% remain at the very low end of the company’s 10-year U.S. performance, highlighting continued weakness, the bank said. Apart from a robust RAM performance and an unusually strong June for the Chrysler Pacifica minivan, the rest of the automaker’s U.S. model portfolio remains very weak, Citi said. The bank lowered its target price to €5.50 from €7.20 and kept a neutral rating.

Citi also assessed Mercedes-Benz, noting that global car sales fell 8% in the second quarter but the stock didn’t significantly react, highlighting the market’s very low expectations. The company sold 2,000 fewer cars in the second quarter than in the first, suggesting another weak margin after the 4.1% reported in the first quarter, Citi added. Daimler Truck’s North America sales missed Citi expectations by 5% in the second quarter, likely due to supplier bottlenecks, analysts Klas Bergelind and Siron Ng wrote. Citi said the margin in Trucks North America will still be at least at the upper end of the 6%-8% corridor for the quarter.

In the defense sector, MWB Research analysts said German defense groups will lose out as European militaries shift spending away from tanks and armored vehicles toward air defense, drones, and surveillance. “The NATO summit disappointed the tank bulls and confirmed the shift in spending priorities,” the analysts said. The strategy shift will hurt Hensoldt, Rheinmetall, and Renk given their role as suppliers of land-based systems, they added. Estonia dropped a €500 million order for vehicles from Rheinmetall to invest in drones and air defense instead, according to MWB. Shares in Rheinmetall, Hensoldt, and Renk fell 3.8%, 5.3%, and 4.05%, respectively.

On the trucking and logistics front, National Bank of Canada analyst Cameron Doerksen said TFI International is well-positioned to capitalize on a quiet structural turnaround in the trucking sector, citing lower industry supply due to regulatory changes in the U.S. and Canada. He said he was “confident in a broader industry pricing rebound driven by lower industry supply” and that the up-cycle could be more long-lasting than historically typical.

HSBC analysts said mainland Chinese airlines are expected to post deeper first-half losses compared with a year ago due to fuel pressures, though jet fuel is down 54% since the peak of the Middle East conflict. The divergence between the Big 3—Air China, China Southern, and China Eastern—and Cathay Pacific is deepening, with Cathay expected to log a profit on robust premium demand and cargo yields, HSBC said.

In Southeast Asia, Malaysia’s auto sector is expected to be supported by a speedier pace of electric vehicle adoption in the second half, led by Proton’s eMas models, said Daniel Wong at Hong Leong IB. National carmakers Proton and Perodua are expected to benefit from Budget 2026 incentives and tighter rules on imported EVs, the analyst said. The ringgit is expected to strengthen versus the U.S. dollar toward the end of 2026, lowering import and component costs and supporting margins, he added.

WICE Logistics is likely benefiting from Thailand’s foreign direct investment and export upward cycles, ttb wealth securities analyst Rata Limsuthiwanpoom said. The freight forwarder is well-positioned through its integrated platform and supply-chain solutions, the analyst said. The brokerage forecasts EPS growth of 21% in 2026, 14% in 2027, 22% in 2028, and 22% in 2029, and upgraded the stock to buy from sell.