Volkswagen ejected from European blue-chip index in blow to crisis-hit carmaker

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Volkswagen has dropped out of the Eurozone’s most important blue-chip stock index for the first time in 15 years, in a move that traders say is likely to add further downward pressure to the German carmaker’s battered share price.

The Wolfsburg-based company, whose shares have fallen more than three-quarters from the levels they reached during the 2021 stock market rally to about a 16-year low, has left the bloc-wide Euro Stoxx 50 as part of a review by index provider Stoxx. The index advertises itself as tracking the bloc’s “supersector leaders”.

The departure of one of Europe’s best-known manufacturers, following the removal last year of Fiat and Peugeot maker Stellantis, highlights the threat to the sector posed by the growth of lower-cost Chinese rivals, as well as scepticism over VW’s historic restructuring, which will lead to 100,000 job cuts.

“The whole sector is depressed given the seemingly existential risks it is facing,” said Michael Tyndall, senior global autos analyst at HSBC, adding that VW’s current depressed valuation also reflected market concerns about the restructuring costs.

Analysts said VW’s removal could exacerbate the pressure on its share price as exchange traded funds that mirror the index sell their stakes. According to Stoxx, 30 exchange traded funds with a combined market value of €59bn replicate the Euro Stoxx 50, while more than 110,000 active structured products are also tied to it with a sales volume of more than €68bn.

“Inclusion in an index does not alter a company’s fundamental strength,” VW said, adding that the group “remains an attractive investment for investors” in spite of the “most significant transformation” in the automotive industry’s history.

Stellantis’s share price has nearly halved since last year’s removal, although the company also underwent a leadership reshuffle and has struggled to improve its margins in the US and Europe.

Also leaving the index is Dutch information-services group Wolters Kluwer. The two stocks will be replaced by Nokia, the Finnish mobile phone giant that reinvented itself as a network provider for data centres with backing from Nvidia, and French utility Engie.

VW, which briefly became the world’s biggest company by market value in 2008 during a huge short squeeze, initially joined the Euro Stoxx 50 in 2000, two years after the index launched. It was most recently removed from 2010 to 2011 following the global financial crisis.

Earlier this month the carmaker, which is facing plummeting sales in China and higher US tariffs, announced a surprise deal with unions to slim down the organisation, lifting its shares more than 9 per cent. On Friday, its shares fell 8.3 per cent after the company issued a profit warning, blaming a €6bn writedown on the valuation of its stake in Porsche, a continuing downturn in China and rising restructuring costs.

The German group, which also owns Porsche and lorry maker Traton, remains one of the most cheaply valued stocks in the autos sector globally amid concerns that its complex governance structure will hamper the changes needed to keep up with the rapid rise of Chinese rivals.

Despite this month’s rebound, VW’s market capitalisation of €38bn is just a fraction of its annual sales of €322bn.

“That market valuation sends a very clear signal about just how sceptical investors are about Volkswagen,” Simon Jäger, portfolio manager at German asset manager Flossbach von Storch, told the FT.

VW said its restructuring would improve its financial performance and “should also have a positive impact on Volkswagen shares”, adding that it was eyeing a “return to Euro Stoxx 50 index in the medium term”.

Ferrari, BMW and Mercedes-Benz are the only car stocks left in the Euro Stoxx 50.

“It’s a sign of the times,” a rival executive said of VW’s removal from the index, adding that the reputational impact was likely to be bigger than the actual investment outflows.

VW’s culling will bring down the number of German blue-chips in the Eurozone’s most important index to 16, reflecting the persistent struggles of the country’s listed corporate juggernauts.

For the past five years, the sub-index of German Euro Stoxx constituents underperformed the total index markedly, with an annualised return of 10.9 per cent compared with 12.5 per cent for the whole Euro Stoxx 50, according to Stoxx data.