Reported EU hybrid cap could slow Chinese automakers' share gains next year

J.P. Morgan: pricing power stronger, market-share improvement possible

Chinese automakers could see a sharp slowdown in market-share gains next year if reported measures to curb hybrid exports to Europe are implemented, Citi analysts said. The EU and China reportedly reached a preliminary agreement to cap the exports at 350,000 units a year over the following four years, compared with an estimated 800,000 imports in 2026.

Citi said the quota would force Chinese original equipment manufacturers to localize production, change European pricing and model strategies, and reduce Chinese market-share gains. “We think this quota will force China original equipment manufacturers to localize production, change EU pricing and model strategies, and reduce China market share gains,” the bank said. Citi also said Chinese competition had made EU automakers “un-investable” for many investors and that the legislation could make them “investable” again.

J.P. Morgan separately said the European Commission was implementing measures to restrict hybrid imports from China into Europe. The bank said the rules should support mass automakers such as Renault, Volkswagen and Stellantis, along with suppliers. J.P. Morgan said the rules would reinforce pricing power in Europe and possibly provide a modest improvement in market share across the largest European manufacturers.

The bank said hybrid imports were being limited to 350,000 units from an estimated run rate of 800,000. J.P. Morgan expects BYD, Leapmotor, Geely and Chery to respond by rapidly increasing European production, replacing imports with local assembly. According to reports cited by the bank, the pact would move away from a total phase-out of internal-combustion engines. The reported agreement instead scales back the 2035 carbon-dioxide reduction target to 90% without requiring alternative-fuel offsets.

In a separate note, Deutsche Bank analyst Tim Rokossa said Porsche SE’s third-quarter results would take a significant hit from a goodwill impairment at Volkswagen. Volkswagen’s guidance update last month included a €6 billion noncash goodwill impairment related to Porsche AG, Rokossa said. Porsche SE’s 31.9% stake in Volkswagen means its share of the carmaker’s earnings will be materially affected, the bank said.

“While the impairment is noncash in nature, it is expected to weigh significantly on Porsche SE’s reported group result after tax for full-year 2026,” Rokossa wrote. Deutsche Bank rates Porsche SE stock at buy with a €43 target price. Porsche SE shares fell 0.4% to €25.08.

Canadian railroads will need to find a new growth driver to replace grain, a transition that poses a particular challenge for Canadian National Railway, Raymond James analysts said in a note that downgraded the stock to market perform. The analysts said grain, the dominant growth engine for both carriers through 2026, should remain healthy in absolute terms but fade rapidly in its outsized contribution to growth.

Raymond James said Canadian Pacific Kansas City has solid growth prospects outside grain, while CN Rail has “fewer obvious replacement growth drivers.” “The handoff therefore appears more challenging at CN,” the analysts wrote. Canadian National Railway shares fell 1.9% to $119.45.

TD Cowen analyst Tim James said Mullen Group’s acquisition of Wilson International is a prudent way to take advantage of changing and uncertain trade policies between Canada and the U.S. James viewed the transaction as “slightly positive,” saying it would benefit the logistics company with accretive margins. The acquisition also complements Mullen Group’s existing customs-brokerage portfolio, James said.

James said the decision to acquire Wilson was “likely a reflection of management confidence and the early success of the Cole Group transaction.” Mullen Group shares rose 2.7% to C$27.85.

Deutsche Bank analyst Jaime Rowbotham said DHL Group will reach its midterm EBIT target this year as structural and geopolitical tailwinds benefit the logistics company. DHL Group upgraded its outlook for 2026 EBIT to more than €7 billion from more than €6.5 billion, bringing the forecast to the midterm target set in 2025. Rowbotham attributed the increase mainly to DHL Group’s express unit.

DHL Group reported third-quarter revenue of €22.6 billion, compared with consensus of around €21.8 billion, and EBIT of €1.71 billion versus consensus of €1.65 billion. Deutsche Bank retained its buy rating and raised its target price to €64 from €62. DHL Group shares fell 1.8% to €57.16.