Goldman Sachs just turned bearish on BMW and others — and Tesla could be to blame

Published Fri, Apr 7 202312:33 AM EDTUpdated Tue, Apr 11 202312:58 AM EDT

Goldman Sachs has warned that European automakers are at risk of losing market share to Tesla and Chinese firms. The investment bank's pessimistic view came as it downgraded BMW from buy to neutral and Volvo Cars from neutral to sell, while upgrading Ferrari from sell to neutral. Goldman also raised the price target for Fiat-Chryser's parent Stellantis by 10.5%. The Wall Street investment bank said the transition toward battery electric vehicles in Europe could spark swings in some share prices. Europe's incumbent mass-market brands accounted for 72% of sales last year, Goldman Sachs analysts said. But they added that if the automakers want to retain their strong standing, they will need to produce products with industry-leading powertrain efficiency. "To date, we believe there is limited evidence of industry leading products when we consider European BEV offerings based off the overall efficiency of the powertrain," wrote the analysts led by George Galliers in a note to clients on April 6. The table below shows Goldman Sachs' changes to its price targets: Goldman raised price targets for just two stock: Porsche , where it increased its target multiple by 24%, and Ferrari, where it changed the company's capital costs in its valuation methodology. The bank noted that Tesla's reported gross margins were significantly higher than those on Europe's battery electric vehicles, suggesting a wider technology gap between the two regions. The report also highlighted risks from Chinese competitors looking to expand internationally due to high levels of competition and discounting in their domestic market. This could also eat into the market share of established players over time. Chinese electric car maker Nio announced plans to open a manufacturing plant in Hungary last year. Similarly, Warren Buffet-backed BYD plans to open a plant on the continent in 2025. Several Chinese EV battery makers, including CATL, have already begun production in Europe. Goldman noted that European automakers had already begun adapting to the changes in the market, however. For example, it said several firms have already started to focus on luxury markets where they believe less competitive risk exists, along with more resilient consumer demand during economic softening. The change in regulation allowing for e-Fuel — a synthetic drop-in replacement for gasoline — also has the potential to de-risk companies and brands, according to Goldman Sachs. — CNBC's Michael Bloom contributed to this report.