A series of recalls continues to cast a pall over automakers around the globe. The latest recall involved Fiat Chrysler Automobiles N.V. (FCAU - Free Report) . The automaker announced the recall of more than 5.3 million vehicles from North America to repair a defective cruise control. The recall includes gasoline-based combustion engine vehicles with model years between 2014 and 2019.
Moreover, the week saw Tesla, Inc. (TSLA - Free Report) extending the launch of Model 3 at overseas markets to the next year. The company’s CEO, Elon Musk informed that the left-hand drive of Model 3 will be rolled out in the first half of 2019 in Asia and Europe, though the company initially planned to release it in the later-half of 2018.
The Japanese automaker Toyota Motor Corp. (TM - Free Report) announced plans to raise the production of hydrogen-powered vehicles at its two facilities. The move is in line with its projection, stating global sales of fuel cell electric vehicles (FCEV) will increase to at least 30,000 units per year after 2020.
(Read the previous roundup here: Auto Stock Roundup for May 24, 2018)
Recap of the Week’s Most Important Stories
1. Toyota announced plans to ramp up the production of hydrogen-powered vehicles at its two facilities. One of the two facilities will manufacture hydrogen fuel stack mass while a new line will be added to an existing facility for producing high-pressure hydrogen tanks. The decision is in line with Toyota’s projection that global sales of FCEV will increase to at least 30,000 units per year after 2020. At present, the figure is 3,000 units per year.
In order to increase fuel cell stack production, the facility will be shifted from its existing location to Honsha Plant in Toyota City. Further, the production of high-pressure hydrogen tanks will be handled by its Shimoyama Plant in Miyoshi City. Production at new sites will begin around 2020.
In December 2014, the company introduced its mass-produced fuel-cell sedan, Mirai. Due to high manufacturing costs and difficulty in building its components, Mirai was initially manufactured in small lots. Gradually, the annual production and sales increased from around 700 units in 2015 to roughly 2,000 units in 2016. (Read more: Toyota to Build More FCEVs to Support Sales Target Post 2020)
Toyota currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
2. Per Reuters, Fiat Chrysler announced the recall of more than 5.3 million vehicles from North America to fix a defective cruise control. In unusual situations, the defect might prevent drivers from deactivating the vehicle’s cruise control. The device usually helps drivers to retain a constant speed without intervention.
Further, the company has warned owners not to use the faulty function before the software gets updated in their vehicles.
Out of the recalled vehicles, more than 4.8 million are from the United States while 490,000 are from Canada. The recall includes gasoline-based combustion engine vehicles with model years between 2014 and 2019. The vehicles include Chrysler 200, Chrysler 300, Chrysler Pacifica, Dodge Charger, Dodge Challenger, Dodge Journey, Jeep Grand Cherokee, Jeep Wrangler, and Ram 1500, 2500 and 3500 pickup trucks, Dodge Durango, Jeep Cherokee, and Ram 3500/4500/5500 cab chassis trucks. Owners of the affected vehicles will be informed this week and the repairs will be done free of cost. (Read more: Fiat Chrysler to Recall 5.3M Units in North America)
Fiat Chrysler currently carries a Zacks Rank #3 (Hold).
3. Volkswagen AG anticipates reaching its target of selling one million electric vehicles (EVs) by 2025, per Reuters. Strong demand from China and Europe, and untapped potential in the southern hemisphere are behind this positive expectation.
Notably, after being severely affected by the emissions scandal in 2015, this German auto giant set an ambitious plan to emerge as the world leader in green transport. By 2025, the company intends to deliver one million VW-brand EVs every year. This strategy, to enter into volume production of EVs, has been taken by the company as its rival Tesla is investing enormous amount for the mass production of the Model 3.
An upsurge in EV investment in China, the world’s largest auto market, can be attributed to the efforts adopted by the mainland to tackle air pollution. This has led to the lowering of battery prices and growing appeal of the EV technology. Other German automakers are also investing a huge amount of money for EVs. Apart from China, Europe and the United States, Volkswagen also sees huge opportunities in other areas, including South America. (Read more: Volkswagen to Meet EV Target on Rising Demand)
Volkswagen currently carries a Zacks Rank #3.
4. Per Reuters, Nissan Motor Co. (NSANY - Free Report) is reportedly cutting down its production in North America by about 20%. Waning profitability in the United States has prompted the automaker to make such a move.
Notably, considerable growth in vehicle sales in the United States in the past can be attributed to higher discounting and fleet sales. This, however, eroded the profitability of the second-largest Japanese automaker. The declining profitability has prompted the automaker to rethink its strategy and cut down production in North America.
Nissan’s sales in the United States declined 6.5% so far in 2018, due to slow demand for its high-volume Altima sedan and popular Rogue crossover sports utility vehicles (SUVs). Huge discounts for Altima, Rogue crossover SUV and other models were responsible for the sharp decline in Nissan’s North American operating profit.
Presently, production cuts are in progress at Nissan’s two assembly plants n the United States and three in Mexico. However, production will not be completely stopped, with the cutbacks likely to complete later this year. Now, the company aims at improving profitability in North America while also raising sales in China, which is the biggest auto market in the world. (Read more: Nissan to Lower North American Output, Raise Profitability)
Nissan currently has a Zacks Rank #4 (Sell).
5. Tesla is reportedly not only struggling with its Model 3 production target in the United States but also in the international markets. This has prompted the automaker to extend the launch of Model 3 at the overseas markets to the next year.
The company’s CEO, Elon Musk informed that the left-hand drive of Model 3 will be rolled out in the first half of 2019 in Asia and Europe. The company initially targeted to release the vehicle in the later-half of 2018. Further, the right-hand drive Model 3 units for the United Kingdom and other countries are anticipated to launch in the middle of 2019.
Tesla has been struggling to manufacture 5,000 Model 3 units as a weekly target by the end of second-quarter 2018. In order to meet the target, the company announced the addition of another working shift for general assembling, body and paint at its hub in Fremont, CA. Earlier, in the first quarter, Tesla manufactured 2,020 Model 3 vehicles per week, lagging from its target of 2,500 units.
Additionally, Musk announced that Tesla is holding the production of the low-cost Model 3 sedan version. The $35,000 low-cost version will be available after the company reaches its goal of producing 5k units of premium edition every week. (Read more: Tesla Delays International Launch of Model 3 to 2019)
Tesla currently carries a Zacks Rank #2.
Last week, Tesla recorded the maximum increase. The maximum decline was registered by Toyota.
In the last six months, the maximum rise has been recorded by Advance Auto Parts, Inc. (AAP - Free Report) while shares of Harley-Davidson, Inc. (HOG - Free Report) have declined the most.
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What’s Next in the Auto Space?
Watch out for the usual news releases of other auto companies over the next week.
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