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Auto Stock Roundup: US Sales Plunge, Tata Motors Earnings Rise, Toyota to Invest in Malaysia

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Weak U.S. sales data for May raised concerns in the auto sector over the last few days.  Meanwhile, recalls were announced for nearly 16.4 million more vehicles with defective Takata airbags.

Tesla Motors, Inc.’s (TSLA - Free Report) CEO Elon Musk revealed a couple of interesting tidbits related to Superchargers and software updates at its annual meeting on Tuesday. Further, Tata Motors Limited (TTM - Free Report) reported a significant improvement in earnings and revenues in the quarter ended Mar 31, 2016, while Toyota Motor Corporation (TM - Free Report) announced a new investment in Malaysia.

(Read the previous roundup here: Auto Stock Roundup for May 26, 2016)

Recap of the Week’s Most Important Stories

1. U.S. light-vehicle sales fell 6.1% year over year to 1.54 million units in May 2016. This marked the biggest decline in U.S. sales since Aug 2010. While two less selling days compared with May 2015 played a role, the main culprit was a 16% fall in passenger car sales, which overshadowed a 2.4% rise in truck sales. Sales on a seasonally adjusted annualized rate (“SAAR”) basis dropped to 17.46 million units in May 2016 from 17.47 million units in May 2015 (read more: U.S. Auto Sales Fall 6.1% in May: 4 Stocks to Avoid Now).

2. Following last month’s National Highway Traffic Safety Administration ("NHTSA") order to recall another 35–40 million Takata airbag inflators in the U.S. by 2019, 15 automakers announced recalls of nearly 16.4 million vehicles over the last week. The figure is set to increase further as automakers try to comply with the NHTSA orders. The defective Takata airbags can explode, shooting metal fragments and injuring passengers, in case of a car crash. Around 24 million vehicles with 28.8 million airbag inflators had been recalled earlier for the defect that has affected 17 automakers.

3. Tesla’s CEO revealed that buyers of the base version of the company’s latest car, Model 3, will not get free use of its Superchargers. They may have to purchase a package to use these high-speed chargers, although the cost will be significantly lower than gasoline. Musk also revealed that two software updates coming in June and July will fix the problems in Model X’s falcon wing doors. He claims that these updates will make them better than normal doors (read more: Tesla to Charge Model 3 Owners for Supercharger Use).

4. Tata Motors reported an income of INR15.23 per ordinary share ($1.25 per American Depositary Share or ADS) for the fourth quarter of fiscal 2016 (ended Mar 31, 2016). In the year-ago quarter, the company had earned INR5.26 per share (46 cents per ADS). Consolidated revenues increased 19% year over year to INR806.84 billion ($12.03 billion). This improvement in top line was driven by strong sales in the Jaguar Land Rover business in the UK, Europe, North America, China and other Overseas markets. Strong volumes in the medium and heavy commercial vehicles segment and higher volumes in the light commercial vehicles segment in the standalone business also contributed to top-line growth.

5. Toyota announced that it will invest around 49 billion yen ($488 million) to open a new vehicle production plant in Malaysia. The new plant will be constructed in Klang, in the state of Selangor. Its annual production capacity is estimated to be 50,000 vehicles. This facility will exclusively produce passenger vehicles. It is expected to start operations from early 2019 and will double Toyota’s production volume to 100,000 units per annum in Malaysia (read more: Toyota to Expand in Malaysia with New Production Plant).

Performance

The auto sector companies saw mixed fortunes last week. Harley-Davidson, Inc. (HOG - Free Report) was leading the list of gainers, while General Motors Company (GM - Free Report) lost the most among the stocks listed below.

Meanwhile, most auto stocks had a poor run over the last six months. Toyota lost the most over this period, while AutoZone, Inc. (AZO - Free Report) was the only gainer.

Company

Last 1-Week Period

Last 6 Months

GM

-3.3%

-14.7%

F

-1.9%

-5.5%

TSLA

-2.7%

-5.9%

TM

+1.5%

-16.8%

HMC

-1.7%

-16.1%

HOG

+1.6%

-1.8%

AAP

-2.9%

-1.7%

AZO

+0.2%

+1.5%

What’s Next in the Auto Space?

On Jun 6, 2016, Thor Industries Inc. (THO - Free Report) will report its financial results for the quarter ended Apr 30.

On Jun 10, 2016, Harley-Davidson will pay a quarterly cash dividend of 35 cents per share to shareholders of record as of May 26.

A few automakers may announce their China sales figures for May in the coming week.

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