Auto Stock Roundup: Toyota Gears Up for Mobility Services, Fiat Chrysler to Recall

This week witnessed Toyota Motor Corporation TM making a significant move in the self-driving technology front. Per Reuters, four group firms of Toyota are likely to set up a joint venture to combine their self-driving technologies. The idea is to compete with Stuttgart, Germany-based leading multinational engineering and electronics company, Bosch Group. This Japanese auto giant also intends to expand its partnership with Uber Technologies in order to develop and launch its autonomous ride-sharing as a mobility service. Additionally, Toyota will invest $500 million in Uber.
 
Further, the German auto giant Volkswagen AG VLKAY has made the announcement to invest roughly $4 billion by 2025 to build digital businesses and software. The new products include a platform based on a cloud computing technology for providing car sharing services.

Past week also saw the news of a recall. Per AP, Fiat Chrysler Automobiles N.V. FCAU is recalling about 209,000 units of sports utility vehicle and minivan, globally. Braking problem in the vehicles, which can make the vehicles take longer distances for stopping, has led to this recall.

In another development, one more Japanese automaker Nissan Motor Company NSANY has started manufacturing its first electric sedan, Sylphy Zero Emission, for the China market, per AP. The new sedan model, based on Nissan's Leaf, will be produced by the company and its Chinese partner, DongFeng Motor Group Co., Ltd. (Dongfeng).

(Read the previous roundup here: Auto Stock Roundup for Aug 23, 2018)

Recap of the Week’s Most Important Stories

1.    Volkswagen has made the announcement to invest 3.5 billion euros (roughly $4 billion) by 2025 to build digital businesses and software, per Reuters. The new products under the plan include a platform based on a cloud computing technology for providing car sharing services.

German vehicle manufacturer Volkswagen is working on a new operating system software, to be named ‘vw.OS’. The new operating system is slated to be introduced in Volkswagen brand electric vehicles (EVs) from 2020 onward. The vehicles, embedded with the operating system, will have an entirely new electronic architecture, aimed at easing self-driving functions.

This automaker anticipates accruing roughly 1 billion euros in sales by 2025 by offering new digital services. The digital push includes embedding smartphone applications into car infotainment systems. The company also announced the plan to launch a car-sharing business — We Share — in Berlin, using a fleet of 2,000 electric cars in second-quarter 2019. (Read more: Volkswagen Plans to Invest $4 billion for Digital Business)

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

2.    Fiat Chrysler is recalling approximately 209,000 units of sports utility vehicle (SUV) and minivan, globally, per AP. The recall is to fix a braking problem in the vehicles, which can make the vehicles take longer distances for stopping.

The recalled models include — 2018 Dodge Journey, 2019 Jeep Cherokee, and the 2018 and 2019 Dodge Grand Caravan, and Jeep Compass, which are majorly from the United States. Brakes in the recalled vehicles are not built per specifications, which lead to the formation of gas bubbles in the brake fluid.

Further, the company’s Mexican unit has issued another recall of more than 122,000 vehicles, per Reuters. The recalled vehicle brands are — Chrysler, Dodge, Jeep and Ram. The recall is to correct a computer programming problem for the vehicle’s powertrain control module. (Read more: Fiat Chrysler Announces Two Recalls Over Safety Issues)

Fiat Chrysler currently carries a Zacks Rank #5 (Strong Sell).

3.    Toyota has announced expanding its partnership with Uber Technologies Inc. (Uber), with an aim to develop and launch its autonomous ride-sharing as a mobility service in the market. Additionally, Toyota will invest $500 million in Uber.

In sync with the target, technology from both the companies will be incorporated into Toyota’s vehicles and will be deployed in Uber’s ride-sharing network. Per Toyota’s management, the collaboration extension and investment will enable it to offer safe and secure mobility services to customers by using the Japanese automaker’s technologies, and vehicles.

Further, Toyota and Uber expect the mass-manufactured self-driving vehicles to be owned and managed by third-party autonomous fleet operators, which are going to be chosen collectively.

Toyota’s Guardian automated safety support system and Uber’s autonomous driving system will be incorporated into the "Autono-MaaS" (autonomous-mobility as a service) fleet. Moreover, Toyota’s core information infrastructure, designed for connected vehicles, i.e. Mobility Services Platform (MSPF), is also going be used in Autono-MaaS. At first, Toyota's Sienna Minivans platform will be used for operating the autonomous fleet. (Read more: Toyota to Extend Alliance With Uber & Invest $500M)

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

4.    Nissan Motor Company has started manufacturing its first electric sedan, Sylphy Zero Emission, for the China market, per AP. The new sedan model, based on Nissan's Leaf, will be produced by the company and its Chinese partner DongFeng Motor Group Co., Ltd..

Nissan assumes Sylphy is going to be a key player in the electric vehicle (EV) market. The model is priced at 166,000 yuan ($25,850), after considering the government subsidies. With a pricing just over half of the Chinese edition of Nissan’s Leaf, it can run 210 miles (338 kilometers) on a single charge. Further, the company announced its target to launch a range of EVs that will attract customers from all the market segments.

In order to curb air pollution that is worsening, China’s government is encouraging customers to opt for EVs while making it tougher for the automakers by introducing stricter fuel efficiency standards and sales quotas. Per the sales quota regulation, to be effective from 2019, every brand has to sell a minimum number of new-energy vehicles every year and has to attain a new-energy vehicle credit score. If an automaker fails to do so, it has to buy credits from its competitors. This has pressurized the vehicle manufacturers to produce models per the requirements of Chinese customers at an affordable price. (Read more: Nissan Initiates Production of E-Sedan for China)

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

5.    Honda Motor Co., Ltd. HMC is bringing CR-V sport utility vehicle (SUV) back in Japan after a brief gap of two years, per Bloomberg. This is the latest initiative taken by the company to regain its lost position from other automakers.

Demand for small and compact vehicles in the country enforced Honda to stop selling Honda CR-V in 2016 and rather bet on its subcompact crossover SUV, Vezel. However, of late, a similar trend to rising fascination for SUVs in the United States and China has also been witnessed in Japan. This is evident as Japan’s yearly SUV sales topped 500,000 units in 2017.

Under CEO Takahiro Hachigo, Honda is launching global vehicle models in more markets rather than following its earlier strategy of offering country-specific models. In 2017, the company reintroduced its Civic model in Japan, after taking a six-year gap.

Further, this CR-V relaunch is targeted to compete with similar variants of other automakers, which include Subaru Forester, Nissan X-Trail and the upcoming Toyota RAV4. The company targets to sell 1,200 units each month, starting this week.

Honda currently carries a Zacks Rank #2.

Performance

Last week, Toyota has witnessed the maximum gain, while highest decline has been witnessed by Tesla, Inc. TSLA.

In the past six months, Advance Auto Parts, Inc. AAP has increased the most. Honda has declined the most.

Company	Last Week	Last 6 Months
GM	2.7%	-1.8%
F	2.9%	-3.1%
TSLA	-5.2%	-7.8%
TM	3%	-2.3%
HMC	0.2%	-13%
HOG	0.9%	-4.2%
AAP	1.8%	39.2%
AZO	1.4%	16.3%

What’s Next in the Auto Space?

Watch out for the usual news releases over the next week.

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Tesla, Inc. (TSLA) : Free Stock Analysis Report
 
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Volkswagen AG (VLKAY) : Free Stock Analysis Report
 
Toyota Motor Corporation (TM) : Free Stock Analysis Report
 
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