Shares in Volkswagen AG, BMW AG and Daimler AG tumbled as China’s woes put growth plans at risk.
The German carmakers were among the biggest losers in the European market, leading the Euro Stoxx autos and parts index to its lowest level since October 2015. Volkswagen, already reeling from the emissions-cheating scandal, fell 4.9 percent. BMW shares dropped 5 percent, and Daimler, the parent of Mercedes-Benz, slid 4.8 percent.
“The massive devaluation of the Chinese currency is currently seen as the single biggest threat to the global economy and the reason for panic selling,” Arndt Ellinghorst, a London-based analyst with Evercore ISI, said in a report. He estimates that a 20 percent drop in the yuan’s value will equate to a loss of about 5.5 billion euros ($6 billion) in the combined profit of the German automakers.
China, the world’s biggest auto market and the largest buyer of German autos, halted stock trading after less than 30 minutes following a selloff after the central bank cut its yuan reference rate by the most since August. The move raises concerns that the slowdown in Asia’s biggest economy is deeper than official data suggest. Billionaire investor George Soros said China is transferring problems to the rest of the world.
The auto industry relied on Chinese consumers to weather downturns in the U.S. and Europe following the global financial crisis in 2008. China also plays a key role in expansion plans for PSA Peugeot Citroen and Fiat Chrysler Automobiles NV. Peugeot was down 5.2 percent and Fiat Chrysler fell 3.4 percent.
“If the situation continues like that, it will weigh on sales over time and affect manufacturers across the board,” Sascha Gommel, a Frankfurt-based analyst at Commerzbank AG, said by phone.