Driving luxury cars has aspirational value for some, but investors globally are increasingly finding it difficult to ascribe premium valuation to the stocks of high-end car makers. And in some cases, pure commodity companies such as steel makers are perceived to be more valuable.The average 2018 price-earnings (P/E) multiple of the top 10 car companies by market capitalisation was 6.9 compared with the average P/E of 9.6 for the top 10 steel companies, according to Bloomberg. The total market capitalisation of the top 10 car makers was $687 billion, three-times that of the top 10 steel companies.The stocks of top car makers have lost 10-32 per cent since the beginning of 2018 wiping out nearly $141 billion of the market value. The sharp fall has pushed the price-book (P/B) multiple of the leading car makers such as Toyota, BMW, Renault, Volkswagen, Honda and Tata Motors below one.66326507

Historically, the Bloomberg World Auto manufacturing index — a gauge for the stock performance of global car makers — traded at nearly 30 per cent premium to the Bloomberg World Steel index since 2010. The auto benchmark is now at 6.5 per cent discount to the steel index.Hazy earnings outlook due to tepid global demand, rising cost to meet strict emission norms, tariff war and the advent of electric vehicles are some of the factors that have impacted the valuation of car makers. In June, Daimler, which owns Mercedes brand, became the first prominent company to cut profit outlook followed by BMW last month. BMW also abandoned operating margin leaving analysts worried since the guidance was perceived as ‘holiest of holies’ among investors. Its stock has lost 12 per cent since then.The global car makers also expect significant rise in the cost of production due to Britain’s decision to move out of the European Union (Brexit). If earnings do not stabilise for global car companies, future dividend payout will be in doubt. Dividend is a crucial element that attracts large institutional investors to the auto sector.