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Auto Stock Roundup: Tesla's New Master Plan, GM's Unfavorable Appeals Court Verdict

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The auto sector is yet to enter the full-fledged Q2 earnings season, keeping its focus firmly on news developments. The biggest news of the week, of course, was Tesla Motors, Inc.’s (TSLA - Free Report) new ‘Master Plan’. Meanwhile, regulators revealed that automakers may not meet the U.S. fuel standards’ target for 2025.  

A new appeals court ruling exposed General Motors Company (GM - Free Report) to several additional ignition switch-related lawsuits, while an audit revealed that Takata was manipulating test results of airbag inflators it was supplying to Honda Motor Co., Ltd. (HMC - Free Report) . Further, Ford Motor Co. (F - Free Report) posted strong first-half sales data for Europe.

Recap of the Week’s Most Important Stories

1. Tesla revealed its ‘Master Plan, Part Deux’ that sketches out the company’s business outline for the next few years. The plan focuses on the expansion of product portfolio, introduction of car sharing services, solar energy-based battery systems and development of self-driving capability. Tesla is developing heavy-duty trucks, to be named Tesla Semi, and high passenger-density urban transport, i.e. buses. These vehicles are expected to be unveiled next year. The company also plans to create an integrated solar-roof-with-battery product for which it is planning to acquire SolarCity. Further, Tesla will lay significant emphasis on developing and refining self-driving technology. In the long run, it also plans to offer car sharing services on autonomous vehicles. In fact, Tesla plans to allow car owners to generate income by offering their cars for the car-sharing service.

2. Regulators revealed that U.S. auto manufacturers are not on track to meet fuel standards by 2025. The government hopes to achieve a fleet-wide target of 54.5 miles per gallon for U.S. vehicles by then. However, if the current trends persist, the vehicles could have an average efficiency of 50.8 miles per gallon only. While manufacturers are not on track to meet fuel economy standards, federal regulators do believe that it is within their capacity to accomplish the task (read more: Auto Manufacturers May Not Meet Fuel Economy Standards by 2025).

3. A federal appeals court ruled that General Motors cannot use the 2009 bankruptcy as an excuse to defend itself against lawsuits over defective ignition switches. The second U.S. Circuit Court of Appeals in Manhattan said that General Motors was aware of the defective switches when it went bankrupt but had concealed the fact. With this, hundreds of pre-bankruptcy claims can be revived, including some lawsuits claiming that the value of the automaker’s vehicles has declined as a result of its actions. Around 1,000 death and injury lawsuits were awaiting the appeals court’s verdict. In addition, the ruling may affect 399 injury and death cases which were settled by the automaker (read more: GM in Trouble on Court Ruling, May Face Billions in Claims).

4. An audit revealed that Takata was manipulating test results of airbag inflators it was supplying to Honda. The audit started in Oct 2015 and its initial stage focused on airbag inflators that were not covered by recalls as of that date. Per Bloomberg, the audit revealed that Takata often eliminated certain test results to show lesser inconsistency in the performance of its inflators. Honda also announced the recall of 190,578 vehicles in India due to defective Takata passenger front airbag inflators.

5. In the first half of 2016, Ford’s sales in the Euro 20 markets increased 7.4% to 718,300 vehicles compared with the industry’s growth rate of 9.3%. Considering all the 50 European markets, the company’s sales grew 7.1% to 807,200 vehicles compared with the industry’s growth rate of 6.7% (read more: Ford's Europe Sales Up 2.6% in June, 7.4% in First-Half 2016).

Performance

Auto sector companies had mostly positive fortunes on the stock market last week. General Motors gained the most ahead of its second-quarter earnings release. AutoZone, Inc. (AZO - Free Report) was the only stock to lose value among the ones listed below.

Over the last six months, Harley-Davidson, Inc. (HOG - Free Report) outperformed the others with a 23.7% gain. Meanwhile, Honda lost the most over the longer term.

Company

Last 1-Week Period

Last 6 Months

GM

+2.8%

+7.0%

F

+1.9%

+15.5%

TSLA

+2.6%

+14.9%

TM

+1.3%

-2.0%

HMC

+1.1%

-6.0%

HOG

+0.9%

+23.7%

AAP

+0.5%

+14.2%

AZO

-0.2%

+12.1%

Auto-Tires-Trucks Sector Price Index

Auto-Tires-Trucks Sector Price Index

What’s Next in the Auto Space?

General Motors will report second-quarter financial results before the market opens today. Many other auto sector companies will report earnings over the week.

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