Hedge funds are stepping up bearish positions against some of Europe’s largest automotive groups, targeting both equity and debt as Chinese manufacturers gain market share and reshape the industry’s competitive landscape, according to a report by the Financial Times.
Investors have increased short positions in the bonds and shares of major European carmakers including Stellantis, Volkswagen, BMW and Mercedes-Benz, reflecting concerns that structural challenges facing the sector are likely to persist.
Long-dated and perpetual bonds issued by several manufacturers have become among the most heavily shorted securities in European credit markets this year, according to market data. Investors cite intensifying competition from Chinese automakers, weakening demand and the impact of US tariffs as key risks to future profitability.
The pressure has also been felt in equity markets, where European carmakers have collectively lost tens of billions of euros in market value during 2026. Hedge funds including Marshall Wace, Two Sigma, Kintbury Capital and Citadel Advisors have been reported among those holding short positions across the sector.
Industry analysts argue that investors increasingly view the challenges facing European manufacturers as structural rather than cyclical. China, once a key growth market for Western carmakers, has evolved into a major source of competition as domestic manufacturers rapidly expand overseas.
Chinese groups such as BYD and Geely continue to increase their presence in Europe, supported by competitive pricing, advances in battery technology and increasingly sophisticated software capabilities. Data from the European Automobile Manufacturers’ Association (ACEA) indicate that Chinese brands accounted for 8.5% of EU vehicle sales during the first four months of 2026, up from 6% a year earlier.
Among the companies attracting the greatest attention from short sellers is Stellantis, whose long-dated bonds have seen elevated borrowing activity, often used as a proxy for short positioning. Investors have also increased bearish bets against several of the company’s bond issues and equity.
Volkswagen has similarly faced pressure in credit markets, particularly in its perpetual debt, while investors have also targeted bonds issued by BMW and Mercedes-Benz.
Market participants point to the speed of innovation among Chinese manufacturers as a significant competitive advantage. New vehicle models are being introduced more rapidly, often featuring updated battery systems and digital technologies that European rivals have struggled to match.
BYD recently announced plans to invest nearly €2bn in European infrastructure by the end of 2027, including support for ultra-fast charging networks, underlining its long-term commitment to the region.
European manufacturers are responding by seeking greater policy support and expanding partnerships with Chinese companies. Earlier this month, several leading automakers called for “Made in EU” measures aimed at incentivising local production and protecting the bloc’s industrial base.
At the same time, collaborations between European and Chinese manufacturers have become increasingly common as legacy carmakers seek access to lower-cost production and advanced technologies.
