Yahoo Finance Auto Roundup: F's Spate of Recalls & RACE's Ambitious Targets Take Center Stage
Last week, the European Automobile Manufacturers Association (“ACEA”) released data for passenger car registrations for May 2022. The European Union (EU) passenger vehicle market contracted 11.2% in May to 791,546 units amid chip woes aggravated by the Russia-Ukraine war. This marked the eleventh straight month of decline. Most of the countries in the EU witnessed a double-digit drop in registrations, including four key markets. Registrations in Italy, Germany, Spain and France witnessed a yearly decline of 15.1%, 10.2%, 10.9% and 10.1%, respectively. During the first five months of 2022, new car registrations contracted 13.7% from the prior-year period to 2,930,366 units. Registrations in Italy, France, Spain and Germany declined 24.3%, 16.9%, 11.5% and 9.3%, respectively, over the same timeframe.
Meanwhile, legacy automakers including General Motors GM, Ford F, Stellantis STLA and Toyota TM turned to congressional leaders, requesting them to remove limits on the number of green vehicles that are eligible for a tax credit of up to $7,500. Currently, the number of tax credits permitted is capped at 200,000 cars sold by a particular company. In a joint letter to the leaders of the Senate and House of Representatives on Monday, CEOs of GM, TM, F and STLA requested Congress to lift the EV tax credit cap until the electric vehicle (EV) market gets mature. They believe that the move would lead to greater adoption of battery-powered cars by consumers.
Meanwhile, Ferrari RACE laid out an ambitious four-year plan (2022-2026), which underscores its commitment toward enhancing its portfolio, revenue opportunities and shareholder value maximization.
While Ford issued three separate recalls last week, General Motors announced an $81 million investment to build premium Cadillac Celestiq. Stellantis also made to headlines with its Jeep brand ready to go all-electric by the year-end in Europe but not in the United States.
While Ford, General Motors and Toyota carry a Zacks Rank 3 (Hold), Ferrari and Stellantis presently hold a Zacks Rank #5 (Strong Sell) and #2 (Buy), respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recap of Last Week’s Important Stories
1. Ford announced the recall of more than 2.9 million vehicles that might fail to shift into the correct gear due to a damaged or missing shift cable. The recall covers various models from 2013-2019 Escape, 2013-2018 C-Max, 2013-2016 Fusion, 2013-2021 Transit Connect to 2015-2018 Edge.Per the National Highway Traffic Safety Administration (“NHTSA"), six cases of property damage and four instances of injuries have been reported.
It also issued a recall of more than 48,000 Mustang Mach-E electric crossovers over issues about a safety defect that may inhibit the mobility of the vehicle. Per the recall decision, the malfunction involves overheating of the vehicle’s battery high-voltage contractors, which can lead to power loss while in motion, thereby increasing the risk of accidents. In yet another issue, Ford recalled 53,103 four-door 2021-2022 Bronco vehicles because a glitch enabled the passenger-side rear door to open from inside the vehicle even when the child safety lock is in the "ON" position.
2. Ferrari unveiled its four-year strategic plan, driven by a string of new models, which would bring exciting revenue opportunities for the firm. The Italian luxury car marker intends to launch 15 new models between 2023 and 2026. This includes Ferrari's first SUV "Purosangue," which is slated to be unveiled this September. Ferrari reaffirmed that its first electric car will be launched in 2025. It also promised its much-anticipated new Supercar to arrive within the plan period. Focusing on three types of powertrains, Ferrari’s product mix by 2026 will comprise of 40% ICE vehicles and 60% hybrid/fully electric cars.
Ferrari envisions achieving net revenues of €6.7 billion in 2026. This implies a 39.5% jump from the 2022 sales guidance of €4.8 billion. It projects 2026 EBITDA to reach up to €2.7 billion in 2026, with margins of 38-40%. Adjusted EPS in 2026 is forecast in the range of €7.2-€8. RACE aims to generate a cumulated industrial FCF of €4.6-4.9 billion over the 2022-2026 timeframe.
3. General Motors announced that it will invest $81 million in its global design and technology campus in suburban Detroit to hand-build its Cadillac sedan, Celestiq, a new electric flagship car that will be produced in limited quantities. The car is slated to be unveiled next month. The investment will be used to purchase and install the required equipment to hand-build the model and for the ongoing campus renovation work. The Celestiq roof is supposed to be one of the first to feature a four-quadrant, suspended-particle-device smart glass that lets each car occupant set their level of roof transparency. The vehicle will be based on GM’s Ultium platform.
This would be GM’s first time building a vehicle for commercial sales at its massive tech campus in Warren, MI. It also marks an important milestone for Cadillac to offer a hand-built car, which is generally earmarked for high-end sports cars and luxury vehicles by premium brands. Celestiq will bring a wave of innovation across the company’s supplier community and enhance Cadillac’s brand value besides delivering exceptional quality vehicles to its customers. GM is optimistic that the new car will spur its growth and reputation in the near future.
4. Stellantis’ auto brand, Jeep, announced plans to stop selling non-electrified vehicles in most European markets by the end of this year. However, its plan for the same in the United States, which happens to be its biggest and most important market, is considerably less clear.The brand intends to sell only hybrids in Europe in the near future and has a small electric crossover planned for the market soon. The progress is much slower in the United States, despite the success of the brand’s 4xe models. However, Stellantis plans to generate half its sales from electric vehicles in North America by the decade's end.
The brand has already tackled the 22-mile trail on electric power alone, with the Grand Cherokee Trailhawk 4xe testifying that Jeep is technically equipped to go off-roading on battery power alone. The concern remains majorly over the issue of power grids in the country and the bandwidth required to support the massive upheaval the firm has planned regarding green cars. There have been promises from the Biden administration to move the country toward e-mobility. That is a bright spot as it is likely that efforts will be made to develop the country’s power situation, which is a prerequisite.
Price Performance
The following table shows the price movement of some of the major auto players over the last week and six-month period.
Image Source: Zacks Investment Research
What’s Next in the Auto Space?
Industry watchers will keep a tab on May 2022 commercial vehicle registrations to be released by the European Automobile Manufacturers Association soon. Also, stay tuned for any update on how automakers will tackle the semiconductor shortage and make changes in their business operations.
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