Analyst Rating Update
Jefferies has upgraded Renault to a "buy" recommendation from "hold", increasing its price target from €30 to €34, which represents an implied 18% upside from the November 9 close. The brokerage also raised its 2026 adjusted EBIT forecast by 9% to €3.3 billion, translating to a 5.3% EBIT margin and reaffirming Renault’s guidance of roughly a 5.5% margin. Free cash flow for 2026 is projected at €1 billion.
Renault is viewed as having more levers to improve profitability than many peers in 2027, including limited direct exposure to the Chinese market, potential benefits from European policies that favour local production and smaller cars, and higher margins from its second‑generation electric vehicles. Jefferies also sees opportunities for new third‑party contracts at Renault’s power‑train joint venture Horse and possible value unlocking from its stake in Nissan. However, the firm expects Renault’s adjusted EBIT margin to narrow to 4.4% in 2027 from the current 5.3% due to material cost inflation and competitive pressure.
Conversely, Jefferies downgraded Mercedes‑Benz to "hold" from "buy", cutting the price target from €46 to €44, leaving an estimated 5% upside. The 2027 adjusted EBIT forecast for Mercedes‑Benz was reduced by about 15% to €5.6 billion, with free cash flow expected at €2.9 billion. The primary concern cited is the Chinese market, where Jefferies estimates Mercedes‑Benz’s operations contributed only around one percentage point to group margins in Q3. The brokerage anticipates intensified pricing pressure from Chinese manufacturers in Europe and indirectly in the United States, eroding Mercedes‑Benz’s margin outlook. While Mercedes‑Benz’s cash returns remain sizeable, Jefferies notes that its cash profile is no longer differentiated from peers.
Overall, the analyst highlights China‑related competitive and pricing pressures as the key downside risk for both manufacturers, emphasizing that Renault’s limited exposure to China and European policy support provide a relative advantage, whereas Mercedes‑Benz faces margin compression from its Chinese operations.