Berenberg welcomes 'a little help' from European defence firms to auto sector

Schaeffler AG

02/04/2025 06:54

** The transfer of underutilised European auto assets and/or workforce to defence sector makes sense, Berenberg says in a note titled "Automotive: a little help from defence welcome"

** It says while defence sector needs scale, the auto sector faces structural overcapacity and this move could accelerate net savings and mitigate related restructuring cash costs

** Berenberg estimates defence industry needs 500,000 more jobs by 2035, while rightsizing auto production may mean a similar scale of layoffs

** It notes auto sector's such revenue diversification may remain niche, ringfenced around Tier 2+ suppliers, such as forging or casting, and mechanical parts from Tier 1 suppliers

** Adds German OEMs or suppliers should be "relatively well" exposed, with Schaeffler SHA0.DE, Continental CONG.DE and Volkswagen VOWG.DE as potential beneficiaries

** Still, it notes, "We do not argue that the defence sector will solve automotive overcapacity issues over the short or even medium term"

 (Reporting by Anna Pruchnicka)

 ((anna.pruchnicka@tr.com))