UBS Equity Preference List European Automobiles 2026 07 31

31 July 2026, 14:12 UTC Chief Investment Office GWM Investment Research

European Automobiles Equity preferences

The European Automobiles Equity Preference list (EPL) is a list of our highest conviction European Automobiles stocks. Rolf Ganter UBS Switzerland AG Sector view: Valuations remain attractive at a around 0.5x price-to-book compared to the 15-year average of around 0.9x. Earnings expectations have Please see important disclaimers and come down, and they may have reached a floor, as signaled in 2Q26 results. disclosures at the end of this There may be light at the end of the tunnel, as companies are making progress document. and are intensifying their restructuring efforts.

Our Top Picks: Continental, Ferrari, Dr. Ing.h.c.F. Porsche AG

Latest change : We have added Michelin to our portfolio with a weight of 15%. To accommodate this, we have reduced the portfolio weights of Mercedes-Benz, BMW and Continental by 5 percentage points (pps) each. We also updated the front page content. Additionally, we have updated the “what drives our opinion” texts for BMW, Porsche AG, Ferrari, Mercedes-Benz Group, and the “Why it is Most Preferred” texts for BMW, Porsche AG, Ferrari, Mercedes-Benz Group, Schaeffler and Valeo.

Read the full article for more details about the respective investment case as well as important disclaimers and disclosures.

Benchmark: MSCI Europe Auto & Components

Most Preferred Company Changes* Currency Weight

BMW Weighting EUR 2.5% Continental Weighting EUR 17.5% Dr. Ing. h.c. F. Porsche AG EUR 10.0% Ferrari NV EUR 35.0% Mercedes-Benz Group AG Weighting EUR 10.0% Michelin Added EUR 15.0% Schaeffler EUR 5.0% Valeo EUR 5.0%

Source: UBS, Consider potential trading restrictions, all figures are rounded *Changes since the last publication

Positioning and key trends We recommend a more diversified exposure to companies with pricing power and strong brand positioning, but also some companies with restructuring potential. We also prefer companies that appear better positioned in light of the US-EU tariff deal, which favors companies that already have a strong US production footprint or are more exposed to Europe, while at the same time looking at some suppliers that develop beyond the traditional automotive space.

Key issues The US tariff situation, the EU’s plans for the Industrial Acceleration Act (“Made in EU”), pricing in Europe, and tough competition in China, as well as

Chief Investment Office GWM, 31 July 2026 Page 1 of 18

Chinese EV competition in Europe, are key issues. In the recent past there has been artificially high, limited, or no volume growth across the important key markets—however, beyond the Chinese market, the situation has normalized, and the bottom may have been reached. However, China and Chinese competition remain tough for Western brands, and margins do not yet show the positive effects of cost-cutting efforts, as European firms remain challenged. To cope with these challenges, a balance between price concessions, volume and capacity adjustments (with further headcount reductions being agreed and/or announced), and even more localization looks to be the strategy of choice for these companies, holding back any substantial short-term earnings rebound. But at least we have seen a stabilization in 2Q26, and full-year financial guidance was confirmed across the board.

The market focus keeps shifting between US tariffs, “Made in EU,” and Middle East news. There was a lot of back and forth on the tariff front. But the US-EU agreement seems to have settled at a 15% levy applied to vehicles imported from Europe, and US car exports to Europe are exempt from the 10% tariffs, mitigating the impact for BMW and Mercedes, which produce SUVs in the US, like the X5 or GLE, and ship them back to Europe. Nevertheless, our previous expectation turned out to be true: Every 10% US tariff increment shaves off around 10% of operating profits for US-exposed European automobile companies, and the impact on operating profits settled at an annualized 12-15% level, which was also one of the reasons for an overall weak 2026 financial guidance of various auto companies in the beginning of the year.

The next big thing is the EU…