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Auto Roundup: KMX's Weak Quarterly Results, TSLA's FSD Price Cut & More

Last week, China Association of Automobile Manufacturers released vehicle sales data in the country for the first quarter of 2024. China's auto sales saw a 10.6% year-on-year increase in the first quarter, reaching 6.72 million units. March sales alone were up 9.9% year over year, surpassing 2.69 million units. New energy vehicles (NEVs) demonstrated strong growth from January to March. NEV production jumped 28.2% year on year to nearly 2.12 million units, while NEV sales increased 31.8% to 2.09 million units.

On the news front, one of the leading auto retailers, Penske Automotive PAG, acquired dealerships in Melbourne to expand its retail automotive operations in Australia. The largest used vehicle retailer, CarMax KMX, reported its fourth-quarter fiscal 2024 results.  Luxury automaker Ferrari RACE introduced a new laboratory, which is dedicated to the research of lithium battery cells. U.S. auto giant Ford F reduced the price of various trims of the F-Lightning model. Meanwhile, electric vehicle (EV) titan Tesla TSLA made it to the top stories by slashing its Full Self-Driving (FSD) subscription price by 50%.

Last Week’s Important News

CarMax reported fourth-quarter fiscal 2024 (ended Feb 29, 2024) adjusted earnings per share of 32 cents, which missed the Zacks Consensus Estimate of 45 cents. The bottom line also declined from 44 cents per share recorded in the year-ago period. The auto retailer registered revenues of $5.6 billion in the quarter under review, which fell short of the Zacks Consensus Estimate of $5.7 billion. The top line also contracted 1.7% year over year.

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The firm had cash/cash equivalents and long-term debt of $574.1 million and $1.6 billion, respectively, as of Feb 29, 2024. During the fiscal fourth quarter, CarMax repurchased shares worth $49.3 million. As of Feb 29, 2024, it had $2.36 billion remaining under the share repurchase authorization. KMX operated 245 used car stores as of Feb 29, 2024. The company expects fiscal 2025 capex in the band of $500-$550 million. CarMax now targets to sell more than 2 million vehicles annually through its combined retail and wholesale channels by fiscal 2030.

Penske is set to acquire two Porsche dealerships and a Ducati motorcycle dealership in Melbourne. The premium vehicle retailer has signed a deal to acquire Porsche Centre Brighton, Porsche Centre Doncaster and Ducati Melbourne West. The Brighton dealership, which is around 20 minutes away from central Melbourne, commenced operations in March 2009 and has been catering to the Porsche community in Melbourne for nearly 15 years. The Doncaster dealership represents the latest addition to the official Porsche Centre and is situated in high-growth northeast Melbourne suburbs.

The transaction is expected to be completed in the second quarter of 2024, pending the fulfillment of customary conditions.Penske is riding high on its strategic acquisitions. In 2023, the company completed acquisitions worth more than $340 million in annualized revenues. The acquisition of Rybrook Group, completed in January 2024, is expected to add $1 billion to Penske's annualized revenues.

Ford has reduced the prices of some of its F-150 Lightning trims by up to $5,500 to stimulate demand for EVs. The latest round of price cuts was focused on F-150 Lightning’s mid-level variants. While the starting prices of the F-150 Lightning XLT Standard Range and Lariat Extended Range were reduced by $2,000 and $2,500, respectively, the starting price of the F-150 Lightning Flash Extended Range was substantially slashed by $5,500. The new starting price of the F-150 Lightning Flash trim is $67,995, closer to its launch price of $69,995. The starting prices of Lightning Pro Standard Range and Lightning Platinum Extended Range variants remained unchanged at $54,995 and $84,995, respectively.

With a target EPA range of 320 miles, a 15.5-inch touchscreen, the B&O sound system with HD radio and speakers, a wireless charging pad, etc., the F-150 Lightning Flash trim promises value for money. Moreover, the F-150 Lightning, with the manufacturer’s suggested retail price of below $80,000, qualifies for the full $7,500 federal tax credit in the United States.

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

Ferrari has opened a new laboratory for the research of lithium battery cells as it prepares to launch its first fully electric supercar by the end of 2025. Headed by University of Bologna scientists, the facility will focus on analyzing solid-state batteries, fast charging, thermal charging and cell safety and efficiency.The move highlights CEO Benedetto Vigna’s vision to coalesce tradition with technology.

The research lab, known as E-Cell Lab, will act as a catalyst in realizing RACE’s plan. Ferrari will share the research conducted in the lab with its main battery suppliers to improve the battery performance. These batteries are set to be assembled in Maranello, where Ferrari is establishing a new factory to manufacture electric and hybrid vehicles. The plant is slated to open in June. The research will also be shared with Ferrari’s technology partner, NXP Semiconductors NV.

Tesla has reduced the monthly subscription price of its FSD software by 50%, from $199 to $99. Despite this price cut, the cost of purchasing the FSD suite outright remains unchanged at $12,000. The FSD package provides access to Basic Autopilot, Enhanced Autopilot, Autosteer on City Streets, and Traffic Light and Stop Sign Control features. By lowering the subscription cost, Tesla aims to make the FSD suite more accessible to customers who are either budget-conscious or skeptical of the technology's capabilities.

Tesla first introduced FSD subscriptions in July 2021, priced at $199 monthly, with a $99 option for cars equipped with Enhanced Autopilot. The company is continually improving FSD through a neural network, which enhances the system's reliability as it accumulates more data from over one billion miles of user-driven data. Despite the reduced subscription price, Tesla still emphasizes that the FSD suite is not fully autonomous and requires driver attention at all times. Although Musk suggests it may be wiser to purchase the FSD suite outright, the subscription model allows customers to test the technology before committing to a full purchase.

Price Performance

The following table shows the price movement of some of the major auto players over the last week and six-month period.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

What’s Next in the Auto Space?

First-quarter 2024 earnings for the auto sector are slated to kick off this week, with Genuine Parts Company slated to report on Apr 18. Industry watchers will also keep a tab on EU vehicle sales for the month of March and the first quarter of 2024.

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Ford Motor Company (F) : Free Stock Analysis Report

Penske Automotive Group, Inc. (PAG) : Free Stock Analysis Report

CarMax, Inc. (KMX) : Free Stock Analysis Report

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

Ferrari N.V. (RACE) : Free Stock Analysis Report

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