Hedge funds pile shorts on German automakers as DAX rises

The DAX climbed to €25,000 this week, its highest level since June 2, as hedge funds increased short positions in German automakers’ bonds and shares.

Marshall Wace and Two Sigma are among the funds that have built large short bets targeting Volkswagen, Mercedes‑Benz and BMW across equities and corporate bonds. Data show Volkswagen’s investment‑grade bonds rank among the most shorted in Europe, with Stellantis listed as the most shorted. Short interest in some perpetual bonds has risen above €750 million. Funds have loaded positions in BMW bonds maturing in 2032 and 2033 and in a €750 million bond due in 2035.

Managers cite growing competition from Chinese electric‑vehicle makers as a reason for the positions. BYD, Nio and XPeng are named as rivals, and BYD is investing about €2 billion this year in charging infrastructure inside the European Union. A Federated Hermes analyst wrote, “If Chinese manufacturers continue combining rapid innovation cycles with lower price points, that creates a difficult backdrop for the established European carmakers.” Hedge funds have also placed short bets on Stellantis and Renault.

Several German carmakers have seen steep share declines this year. BMW has fallen about 26% year‑to‑date. Porsche Automobil, Mercedes‑Benz and Volkswagen Group are down roughly 21%, 17% and 12%, respectively.

Other DAX members have outperformed. Infineon Technologies has risen about 114% year‑to‑date and Siemens Energy is up about 18%.

Technical indicators show an inverted head‑and‑shoulders pattern on the DAX with a neckline near €25,460. The index has moved above its 50‑day and 100‑day exponential moving averages. Traders note a decisive move above €25,460 would indicate a stronger breakout.

Investors will watch upcoming earnings, bond market flows and any further expansion by Chinese automakers in Europe for signs of how competition may affect manufacturers’ revenue and credit profiles.