The auto industry has been in focus, with the spotlight shining on electric vehicle (EV) makers. In the midst of this paradigm shift, Goldman Sachs has forecasted a slowdown in auto volumes for 2024, following a period of robust growth in both production and sales due to the alleviation of supply chain challenges.

Mark Delaney, the esteemed auto analyst, has made a significant move by downgrading the ratings for industry players. Magna International Inc, previously rated a Buy, has now been relegated to Neutral, while Aurora Innovation Inc has transitioned from a Neutral to a Sell rating.

Delaney’s Insight: In his analysis, Delaney forecasts a deceleration in auto sales, attributing it to a return to “typical historical levels” as pricing stabilizes. This adjustment reflects a somber outlook for the sector.

“We believe the company’s relatively slower content per vehicle growth compared to our broader tier 1 coverage will limit EPS/FCF improvement especially as auto production growth moderates,” the analyst wrote.

“While Magna has been investing to support new programs in megatrend areas, we believe its backlog could be impacted by slower BEV ramps from key customers including Ford and GM (e.g. its battery enclosure business),” he added.

Regarding Aurora Innovation Inc, Delaney highlighted a recent surge in the stock. However, he cautioned that the ramp-up for its AV trucks may be more gradual than initially anticipated. This reassessment aims to align with partner feedback and the pace of other autonomous vehicle (AV) deployments.

Market Response: Notably, the downgrade bore immediate consequences, with shares of both Magna and Aurora witnessing sharp declines of 5.64% and 10.77% respectively at the time of publication on Wednesday.

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Photo: Aurora video screenshot