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Auto Stock Roundup: June Sales Rise, Tariff Woes Loom, TSLA Achieves Model 3 Target

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The week saw the release of the auto sales report for the month of June. U.S. auto sales jumped in the month, defying the odds of rising interest rates, higher gas prices and large supply of used vehicles. While the first half of the year saw auto sales rise 1.8%, sales in June increased 5% compared with a year ago. Strong consumer confidence and low level of unemployment boosted auto sales.

There is however the lurking fear of this joyride being derailed due to President Trump’s proposed tariffs. In fact, the auto industry, which relies heavily on a complicated global supply chain and is adapting to a spate of technological changes such as autonomous and electric vehicles (EVs) technology, is likely to be adversely impacted by this trade policy.

Other than the June sales report and tariff concerns, the week saw Tesla, Inc.’s (TSLA - Free Report) vehicle production reaching a historic level in the second quarter of 2018, making it the most-productive three-month period. Notably, Tesla achieved its goal to produce 5,000 Model 3 sedans in the last week of second-quarter 2018.

(Read the previous roundup here: Auto Stock Roundup for Jun 28, 2018)

Recap of the Week’s Most Important Stories

1.    General Motors Company (GM - Free Report) is set to transfer its Vietnamese operation to VinFast Trading and Production LLC, a unit of Vietnam’s biggest private conglomerate — Vingroup JSC, per Reuters. General Motors intends to distribute Chevrolet cars through this local carmaker and anticipates this to boost its sales.

General Motors is likely to transfer the full ownership of its Hanoi factory, dealer network and employee base to VinFast by the end of 2018. From 2019, small cars will be produced under a GM global license.

General Motors used its Hanoi plant to assemble Chevrolet vehicles, with parts imported from South Korea. GM Korea is the biggest production base of General Motors in Asia, excluding China. The latest GM-VinFast partnership will be beneficial for the Chevrolet brand. Domestic strength, the insight of VinFast, and the global scale and expertise of General Motors will bolster this partnership. (Read more: General Motor to Transfer Vietnam Operation to Boost Sales)

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

2.    Autoliv (ALV - Free Report) announced the completion of the spin-off of its electronics segment, Veoneer, Inc. The spin-off process had started in September 2017 when the Stockholm, Sweden-based leader in automotive safety systems announced its intention to establish its electronics segment as a separate entity. The underlying aim was to create two isolated entities, capable of catering to two different markets, with separate product offerings.

Prior to the spin-off, Autoliv made cash contributions to Veoneer taking its cash liquidity to around $1 billion. Autoliv channelized the contribution through a mixture of external funding and existing cash. With the completion of the spin-off, Veoneer will begin regular trading on the New York Stock Exchange and on Nasdaq Stockholm as an independent company. (Read more: Autoliv Closes Spin-off of Electronics Segment Veoneer)

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

3.    Cummins (CMI - Free Report) announced the acquisition of Efficient Drivetrains, Inc. (“EDI”), a company that engages in the designing and manufacturing of hybrid, and fully-electric power solutions for the commercial market. This acquisition will aid Cummins to be a global leader in electrified power. The deal is expected to be completed by the third quarter upon fulfillment of customary closing conditions.

EDI’s skilled workforce and electrification abilities will broaden Cummins’ electrification expertise and products. Further, in real time, EDI’s hybrid system is capable of switching between fully-electric, series and parallel modes.

For over a decade, Cummins has been developing its electrification capabilities. Moreover, over the past nine months, the company has accelerated efforts to build an entire range of electric storage through investments and acquisitions of businesses. In January 2018, the company announced its plan to acquire the automotive battery business of the United Kingdom’s Johnson Matthey. In October 2017, Cummins had acquired battery pack expertise and resources of Brammo. (Read more: Cummins to Acquire EDI for Electrified Technologies)

Cummins currently carries a Zacks Rank #3.

4.    Tesla’s vehicle production reached a historic level in the second quarter of 2018, making it the most-productive three-month period. During the reported quarter, the company witnessed 55% sequential rise in production to 53,339 vehicles, with Model 3 production rising almost three times from the prior quarter. Total production includes 24,761 units of Model S and X combined, and 28,578 units of Model 3.

Notably, Tesla achieved its goal to produce 5,000 Model 3 sedans in the last week of second-quarter 2018. In the past week, the company manufactured 5,031 Model 3 and 1,913 Model S and X vehicles.

Further, Tesla anticipates reaching 6,000 units of Model 3 per week by August end. The company reaffirmed its positive guidance for net income and cash flow for the third and fourth quarters, in spite of higher tariffs and a weaker U.S. currency. (Read more: Tesla Announces Q2 Production & Delivery Numbers)

Tesla currently carries a Zacks Rank #3.

5.    Volkswagen AG (VLKAY - Free Report) announced an investment of €1 billion between 2019 and 2021 for the implementation of its planned model campaign, INDIA 2.0. The campaign will be led by Volkswagen’s Skoda Auto brand. Further, a project center for vehicle development will also be set up in the country to maintain proximity to the market and understand the requirement of targeted customers.

Within a few years, India has the potential to become the third-largest automotive market, globally. In order to tap the projected increase in demand, the company has been looking for sustainable growth in the country. Per Skoda’s CEO, the company is aiming for a market share of up to 5% in the long term, which will also depend on market and segmental development.

Skoda will manufacture new products in India through its heavily-localized MQB A0 platform. The platform is already in sync with stricter emission and safety standards that are expected to be applicable in India by 2020. (Read more: Volkswagen's Skoda Invests EUR 1B in INDIA 2.0 Campaign)

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

Performance

Last week, Tesla witnessed the sharpest decline in price, while Harley-Davidson, Inc. (HOG - Free Report) rose the most.

In the past six months, the maximum rise has been recorded by Advance Auto Parts, Inc. (AAP - Free Report) while shares of Honda Motor Co., Ltd. (HMC) have declined the most.

Company Last WeekLast 6 Months
GM-3.5%-11.5%
F-3.8%-16.7%
TSLA-9.8%-1.8%
TM0.2%-4.8%
HMC-1.3%-18.9%
HOG1.5%-17.1%
AAP0.5%20.4%
AZO0.6%-13.2%


What’s Next in the Auto Space?

Watch out for the usual news releases of auto companies over the next week.

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