Auto Stock Roundup: September Sales Rebound, EV Race Continues, Tesla Misses Production Goals

Big automakers were busy last week in building an all-electric future. Many automakers are gearing up for electric vehicles (EVs). In order to respond to stringent emissions’ norms and the proposals made by many countries to ban internal combustion engines powered with fossil fuels, many automakers were seen gearing up for electric vehicles. But the new technology has yet to give any hint on how to generate profits — the key to the survival of any business entity.

Amid this enthusiasm surrounding EVs, U.S. auto sales figures for the month of September were released. Interestingly, auto sales bounced back in September, following a prolonged year-over-year slide. Robust truck and SUV sales and replacement of cars destroyed by Hurricane Harvey in Texas played a major role this rebound.

Per Autodata Corp., U.S. sales increased 6.1% year over year to 1.5 million vehicles. General Motors Co. GM, Ford Motor Co. F, Toyota Motor Corp. TM, Volkswagen AG VLKAY, Honda Motor Co., Ltd. HMC and Nissan’s performance improved during the month. However, Hyundai and Fiat Chrysler reported decline in U.S. sales.

Recap of the Week’s Most Important Stories

1.    Per a Wall Street Journal report, Toyota is going to start a new venture with Mazda Motor Corp to develop electric vehicles. This move is in sync with the new strategy adopted by carmakers to increase focus on electrified vehicles.

The venture, EV Common Architecture Spirit Co., is the latest alliance between Toyota and Mazda. While Toyota will hold 90% interest in the new venture, Mazda and Denso Corp., Toyota’s biggest supplier, will hold a 5% stake each. The new venture will develop technology for different types of electric vehicles, including passenger cars, mini-vehicles, SUVs and light trucks.

Toyota will provide most of the financial requirements and EV knowhow. Mazda, on the other hand, will support with its advanced technologies such as compression ignition engine (read more: Toyota to Form Joint Venture With Mazda for EV Technology).

Currently, Toyota sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

2.    In its bid to recover from the emissions cheating scandal, Volkswagen has planned to offer two new models every year, catering to the U.S. market in the foreseeable future, per an Associated Press report. In order to entice new customers, the German automaker also intends to double the length of warranties.

Volkswagen is encountering emissions-related problems. The automaker agreed to pay over $20 billion in fines and civil settlements related to the scandal. However, per Autodata Corp, so far this year, Volkswagen brand’s sales in the United States increased 6.4%, while the U.S. market was down 2.7%.

This rise in sales in the United States can be attributed to the launch of two new SUVs. Also, the automaker has plans of introducing a new Jetta compact car and a new midsize luxury car for the 2019 model year.

Recently, the German auto major announced that it will also be investing more than 20 billion euros ($24 billion) in zero-emission vehicles by 2030 to create mass market. The company plans to offer 80 new electric cars across its different groups by 2025, up from its earlier goal of 30 (read more: Volkswagen to Introduce 2 New Models Every Year).

Currently, Volkswagen has a Zacks Rank #2 (Buy).

3.    Tesla, Inc. TSLA has fallen short of its third-quarter 2017 production goals of the new Model 3 sedan. During the quarter, the company delivered 220 Model 3s and produced 260, missing the production target of 1,500. This indicates that production has not been as smooth as anticipated.

However, during the quarter ending Sep 30, Tesla delivered 26,150 vehicles, reflecting a rise of 4.5% year over year and 17.7% sequentially. The rise was due to record deliveries of Model S and Model X during the quarter.

In July, the company started producing Model 3, which is half the starting price of Model S. In its second-quarter earnings results, the company had said that it aims at achieving a run rate of 5,000 and 10,000 units per week in 2017 and 2018, respectively.

However, because of this initial target miss, customers have already started doubting if the company will manage to achieve its target in the future (read more: Tesla Fails to Meet Production Target of Model 3).

Currently, Tesla carries a Zacks Rank #3 (Hold).

4.    General Motors is taking a big stride toward its goals of an all-electric future, per Reuters. The auto giant has plans of rolling out two new electric vehicles in the next 18 months. Also, it intends to add more than 20 electric or hydrogen fuel cell vehicles in its lineup by 2023. With this, the number one U.S. automaker joins several European and Japanese peers, who have vowed to speed up development of EVs.

Also, the automaker plans to increase the number of electric fast-charging stations in the United States in order to take on its EV competitor Tesla. The charging stations built by General Motors would be used by EVs manufactured by other companies. Notably, all the 951 fast-charging stations manufactured by Tesla can only be used by owners of Tesla vehicles (read more: General Motors to Give Thrust to Electric Vehicles).

Currently, General Motors carries a Zacks Rank #3.

5.    Per Reuters, Ford has set up a team to speed up the development of electric vehicles. Mission of the newly formed team i.e. Team Edison will be to think and take faster decisions related to the technology of electric vehicles.

The new corporate team will work with the aim of recognizing and building electric-vehicle partnerships with companies that also include suppliers in few markets.

Ford believes that demand for electric vehicles might rise, driven by mandates and quotas issued by governments.

Many countries namely China, India, France and the United Kingdom have already proposed their plans to discontinue combustion engine vehicles between 2030 and 2040 (read more: Ford Sets up Team Edison to Develop Electric Vehicles).

Currently, Ford carries a Zacks Rank #3.

Performance

In the last week, steepest increase was registered by General Motors and sharpest decline was witnessed by Advance Auto Parts AAP.

In fact, in the last six months, the steepest increase and the sharpest decline too were witnessed by General Motors and Advance Auto Parts, respectively.

Company	Last Week	Last 6 Months
GM	7.9%	28.2%
F	2.8%	9.1%
TSLA	4.5%	18.9%
TM	1.1%	14.7%
HMC	1.2%	4.7%
HOG	-0.8%	-19.8%
AAP	-4.6%	-33.4%
AZO	1.4%	-15.3%

What’s Next in the Auto Space?

Stay tuned for the usual news updates in the space.

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Ford Motor Company (F) : Free Stock Analysis Report
 
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Honda Motor Company, Ltd. (HMC) : Free Stock Analysis Report
 
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