Auto Stock Roundup: GM's Factory Zero, NAV-VWAGY Deal Update & More
Last week, China Association of Automobile Manufacturers (“CAAM”) unveiled vehicle sales data for the month of September. Auto sales in the country rose 12.8% year over year to 2.57 million units for September, marking the sixth straight month of year-over-year growth. Supportive policies by the local government, promotional events and the Beijing auto show seem to have boosted the rebound of vehicle sales, per a CAAM spokesperson. Sales of new energy vehicles rose 68% year over year for September, marking the third straight month of sales increase after snapping a year-long slump in July. (China Heads Global Auto Industry Revival: 4 Stocks in Focus)
(Read the Last Auto Stock Roundup here).
Recap of the Week’s Most Important Stories
1. General Motors GM rebranded the Detroit-Hamtramck plant as ‘Factory Zero’, wherein the company will only develop electric vehicles (EVs). Importantly, the company will invest around $2.2 billion to retool and upgrade the facility for building electric and autonomous vehicles including the Hummer EV pickup and Cruise Origin shuttle. General Motors is on an EV spree and Factory Zero is its flagship assembly plant for a carbon neutral future. Notably, the facility has a production capacity of around 160,000 vehicles a year.
Meanwhile, General Motors also reported third-quarter vehicle deliveries in China. The U.S. auto giant sold 771,400 vehicles in China, marking the firm’s first quarterly sales growth in two years in the country.The mass-market brand Buick deliveries witnessed 26% growth in the third quarter from the prior-year level to more than 250,000 units.
2. Navistar NAV announced that it has accepted the higher takeover bid of $44.5 per share from Volkswagen’s VWAGY truck arm, Traton S.E. Last month, Navistar rejected Traton’s buyout bid of $43 per share, citing that the offer significantly undervalued the company but could be a starting point for exploring a possible transaction. Finally, the company has accepted Traton’s higher bid of $44.5 per share, at which the latter would pay about $3.7 billion for the shares in Navistar it doesn't already own. Considering Volkswagen’s limited exposure in the North American truck industry, and Navistar’s strong footing in the region along with impressive dealership networks, the deal to acquire the remaining shares of Navistar and become its sole owner is a prudent decision by the German auto giant.
3. Ford F has decided to push back the launch of its plug-in hybrid Escape sport-utility vehicle (SUV) to 2021. This decision was made by the company when thousands of Kuga plug-in SUVs were recalled in Europe for heating up while recharging the battery. Moreover, the delay in the Escape SUV’s launch has been caused by decline in the demand for compact SUVs in the United States.
Meanwhile, Ford also reported third-quarter vehicle deliveries in China. The company sold 164,352 vehicles during the quarter, marking 25.4% and 3.6% growth on a yearly and sequential basis, respectively. High demand of commercial and luxury vehicles helped it in bolstering sales volumes. Sales of Ford, Lincoln and JMC brands witnessed year-over-year growth of 12.5%, 64.8% and 38.3%, respectively.
4. Tesla TSLA announced that a fleet of fully-autonomous vehicles will be rolled out this week for a small number of careful and expert drivers for testing. The announcement fulfils the promise made by Tesla’s CEO Elon Musk to launch vehicles with self-driving capabilities by the end of this year, making the long-awaited release well within schedule for a change. The company wants the full self-driving technology to be functional before it rolls out its fleet of robotaxis. Tesla stated that self-driving taxis will hit the road next year in some markets.
5. Amid the gradual business recovery, Penske Automotive PAG announced the decision to reinstate its dividend. During the April-June quarter, Penske Automotive suspended cash dividends to help mitigate the impact of the pandemic. However, the auto retailer is resuming its payout and rewarding a cash dividend of 42 cents per share. The dividend is payable on Dec 1 to shareholders of record as of Nov 10, 2020, which will further enhance investor confidence in the company.
The following table shows the price movement of some of the major auto players over the past week and six-month period.
In the past six months, all stocks have increased, with Tesla being the maximum gainer. Over the past week, all stocks have gained apart from Honda and Toyota.
What’s Next in the Auto Space?
The earnings season for the Auto sector will kick off tomorrow, with PACCAR announcing third-quarter results. Investors will keenly wait quarterly results of the red-hot EV maker Tesla recreational vehicle maker Winnebago, and auto retailers including AutoNation as well as Lithia Motors, which are scheduled to report this week.
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Ford Motor Company (F): Free Stock Analysis Report
Navistar International Corporation (NAV): Free Stock Analysis Report
Penske Automotive Group, Inc. (PAG): Free Stock Analysis Report
General Motors Company (GM): Free Stock Analysis Report
Tesla, Inc. (TSLA): Free Stock Analysis Report
Volkswagen AG (VWAGY): Free Stock Analysis Report
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