Auto stocks weren't immune from the shock waves that roiled the world's stock markets after China devalued the yuan by more than 4 percent over a three-day period last week.
Shares of Daimler, Volkswagen and BMW -- companies that are heavily dependent on China's luxury market -- each took big hits, as did those of some other automakers.
Is this the start of an automotive apocalypse? Probably not.
The devaluation certainly will squeeze global automakers' profits -- and it should give a mild boost to Chinese auto exports -- but it's not going to blow up the automakers' long-term strategy.
The sell-off in auto stocks "is a knee-jerk reaction" by investors, says Nigel Griffiths, London-based chief automotive economist for IHS Automotive.
That's because most of the vehicles that foreign automakers sell in China are also produced in China. So companies such as Volkswagen, General Motors and Ford enjoy a natural hedge against currency fluctuations.
Last week, executives from Ford and GM said their companies remain focused on China's long-term growth prospects.
Auto sales in China are still expected to rise to 35 million vehicles sometime next decade, up from about 23 million this year. No automotive CEO is going to give up on that market.
According to IHS, Volkswagen imported 250,000 vehicles into China in 2014 -- many of them for the Audi brand. Last year, BMW imported 220,000 vehicles; Toyota shipped 200,000, and Daimler imported 165,000, according to IHS data.
Imports to China are going to shrink, says Griffiths, but the luxury automakers were cutting back their sales expectations even before China devalued the yuan. In the spring, China's soft economy began to hurt auto sales, and most automakers have since cut their sales targets.
A devalued yuan will make car imports even more expensive, but the truth is luxury brands such as BMW and Audi have enjoyed high profit margins in China, so they have room to cut prices.
In the short run, China's shaky economy is the biggest worry for the world's auto executives. By comparison, says Griffiths, the yuan's devaluation "is noise."
