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Auto Stock Roundup: TSLA Hikes Prices in China, F to Absorb Tariffs, GM in Focus


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In the past week, electric vehicle (EV) manufacturer Tesla, Inc.TSLA raised prices of Model X and Model S vehicles by 20% in China. In fact, Tesla is the first automaker to increase prices in the world's largest automotive market. Moreover, the company inked a deal to build its first factory outside the United States. With this factory in Shanghai, Tesla will be the first wholly-owned foreign automaker in China. The automaker resorted to this move as the U.S.-China trade war started affecting auto companies. Furthermore, the promise made by the Chinese authorities in April to end restrictions, which required foreign automakers to collaborate with local partners, might have prompted this automaker to take such a decision.

However, Ford Motor Company F announced that it has no plan to raise prices of imported vehicle lineups in China, including high-margin luxury Lincoln models. In other words, the company is going to absorb additional tariffs levied on U.S.-manufactured automobiles.

In another development, General Motors Company GM announced an increase in the production of Chevrolet Bolt EV. Rising demand for this auto giant's electric compact crossover prompted it to increase its production.

(Read the previous roundup here: Auto Stock Roundup for Jul 5, 2018 )

Recap of the Week's Most Important Stories

1.    Volkswagen AG VLKAY has plans to introduce car-sharing services with all-electric cars in 2019, per Reuters. The company will initially launch the service in Germany and expand in other major cities of Europe, Asia and North America by early 2020.

This introduction of mobility service is Volkswagen's attempt to provide an alternative option to customers, who do not prefer owning a car. The new shared-mobility facility will be added to the company's existing division, MOIA. Founded in 2016, the division aims at developing and offering an extensive portfolio of on-demand mobility services.

In Germany, Volkswagen's car-sharing service is going to face strong competition from DriveNow and Car2Go, launched by two major German automakers, which are set to merge soon to beat counterparts like Uber Technologies.

Volkswagen might witness rise in demand for its lineup of EVs, owing to the unveiling of the mobility service. The company intends to sell around 1 million electric cars by 2025. Per management, with its existing plans, the company might actually be able to sell more than the set target. (Read more: Volkswagen to Start Car Sharing Service With EVs in Germany )

Volkswagen currently carries a Zacks Rank #4 (Sell).

2.    General Motors will increase production of Chevrolet Bolt EV by 20% in fourth-quarter 2018, per Autoblog. The growing demand for this auto giant's electric compact crossover has prompted it to increase production.

General Motors stated that its battery-electric car is in huge demand in the United States and across the globe. The company anticipates global sales to be more than 35% for second-quarter 2018 and more than 40% in the first half of 2018. Its plan of extra production will help it keep pace with the growing demand for Bolt EV and restore its inventory level. Importantly, this is in line with the company's vision of a world with zero emissions.

General Motors introduced Bolt EV in late 2016. The 2018 Bolt offers a 238-mile driving range from its 60 kWh battery pack, though the company hasn't yet come out with updated specs for the 2019 model. (Read more: General Motors to Ramp Up Chevrolet Bolt EV Production )

General Motors currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

3.    Tesla has inked a deal to build its first factory outside the United States, per Associated Press. With this factory in Shanghai, this electric vehicle (EV) manufacturer will be the first wholly-owned foreign automaker in China. The deal was announced after Tesla raised prices of Model X and Model S vehicles by 20% in China. The automaker resorted to this move as the U.S.-China trade war started to affect auto companies. Moreover, the promise made by the Chinese authorities in April to end restrictions, which required foreign automakers to tie up with local partners, might have prompted this automaker to take such a decision.

Importantly, China is the world's biggest EV market. But Tesla and many other automakers were unwilling to shift their manufacturing facilities to this country because of the restriction to share technology with local partners. For Tesla, China is the second largest market after the United States.

Tesla stated that the construction for the new factory would start only after the necessary official permits are obtained. No details of the deal have been provided. However, this may turn out to be the biggest foreign investment in Shanghai. (Read more: Tesla Inks Deal to Build Factory in Shanghai, 1st Outside US )

Tesla currently carries a Zacks Rank #3 (Hold).

4.    On Jul 9, PACCAR Inc.'s PCAR shares rose roughly 1.5% to $61.84. On the same day, the company's board approved the repurchase of an additional $300 million worth of common shares and declared a quarterly dividend of 28 cents per share. The dividend will be paid on Sep 5 to shareholders as of Aug 14, 2018.

Per management, the company's increasing profits and positive cash flow help it to offer good returns to its shareholders. In the last fifteen years, PACCAR has returned an average of 12.5% to its shareholders compared with 9.5% by the S&P 500 Index.

Since 1941, the company has been paying regular quarterly dividends to its shareholders. Earlier, in May 2018, PACCAR raised its quarterly cash dividend by 12% to 28 cents per share from the previous payout of 25 cents.

The company is a leading heavy-duty truck manufacturer in the world and has a substantial manufacturing exposure to light/medium trucks. It also provides customer support for its products by supplying aftermarket parts as well as finance and leasing services. (Read more: PACCAR Announces $300M Share Repurchase & Dividend Payout )

PACCAR currently carries a Zacks Rank #3.

5.    Ford has no plans to increase prices of imported vehicle lineups in China in the near term, including high-margin luxury Lincoln models, per Reuters. This decision indicates that the company is going to absorb additional tariffs on U.S.-manufactured automobiles, beginning Jul 6.

In May, Ford and Lincoln had reduced prices of imported models in China. The decision was taken after the Chinese government announced tariff cuts for automobiles, effective Jul 1. However, with Trump's tariff implementation on $34-billion Chinese imports, China recently announced an additional 25% levy on 545 American products that includes U.S.-produced vehicles.

Ford's decision is expected to hurt its profit margins, which is already witnessing sluggish sales in the largest automotive market, China. In the first half of 2018, the company's sales declined 25% year over year  to 400,443 vehicles. Per LMC Automotive, this marked the biggest first-half percentage decline in the country since 2001. (Read more: Ford to Fully Absorb Tariff, Declares No Price Hike )

Ford currently carries a Zacks Rank #3.

Performance

The last week saw all these stocks gain, with Advance Auto Parts, Inc. AAP recording the biggest gain.

In the past six months, share prices of all these stocks have declined except for Advance Auto Parts. Harley-Davidson, Inc. HOG has declined the most.

CompanyLast WeekLast 6 Months
GM0.8%-10.8%
F0.7%-16.3%
TSLA2.6%-5.1%
TM0.5%-6.6%
HMC0.4%-19.3%
HOG1.6%-21%
AAP3%20%
AZO1.2%-13.5%


What's Next in the Auto Space?

Watch out for the usual news releases of auto companies over the next week.

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Ford Motor Company (F): Free Stock Analysis Report

PACCAR Inc. (PCAR): Free Stock Analysis Report

General Motors Company (GM): Free Stock Analysis Report

Tesla, Inc. (TSLA): Free Stock Analysis Report

Volkswagen AG (VLKAY): Free Stock Analysis Report

Advance Auto Parts, Inc. (AAP): Free Stock Analysis Report

Harley-Davidson, Inc. (HOG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: F , PCAR , GM , TSLA , VLKAY


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