Auto Roundup: CPRT's Q4 Earnings, BMW's $750M Investment & More
The contract between United Auto Workers (UAW) and Detroit Three automakers expired on Sep 14 at midnight. Despite the automakers making unprecedented wage hike offers, negotiations hit an impasse in the final stages. Both parties failed to reach a consensus on a new labor contract by the deadline. As expected, the UAW, standing firm on its demands, initiated a simultaneous strike against all three major American automakers. (UAW's Landmark Strike Shakes Up Detroit's Big 3 Automakers)
Meanwhile, as electric vehicles (EVs) are becoming more popular, legacy automakers are fast changing gears to e-mobility. However, the EV landscape is fraught with challenges, including high costs for a swift e-mobility shift, leading to unprecedented collaborations in the auto industry. In a groundbreaking move, three auto giants, BMW Group BMWYY, Ford F and Honda HMC announced a joint venture — ChargeScape, LLC — last week. ChargeScape strives to enhance electric grid reliability and sustainability, accelerating the adoption of smart charging and vehicle-to-everything solutions nationwide.
In other news, U.S. auto-titan Ford intends to add an optional heads-up display and a built-in 5G modem to its 2024 F-150 truck lineup. The hybrid powertrain option will now cost the same as the 5L engine option. Germany-based auto biggie BMW announced plans to invest $750 million in a U.K. facility to make its Mini brand all-electric by 2030. EV king Tesla TSLA and its suppliers will invest $15 billion in a Mexico gigafactory over the next two years, per the state governor. The investment is thrice the amount previously announced by the officials. The online auto auction leader, Copart CPRT also made it to the top stories as it delivered a comprehensive beat in fourth-quarter fiscal 2023.
Last Week’s Top Stories
1. Tesla and its suppliers are set to invest $15 billion in a gigafactory in Mexico over the next two years, said Nuevo Leon Governor Samuel Garcia. The amount is three times greater than the figure reported previously by Mexican officials. In March, Elon Musk, CEO of Tesla, said that the company plans to open a gigafactory in northern Nuevo Leon state to expand its global footprint. At that time, Musk did not disclose the investment amount but Mexican officials said the factory would require nearly $5 billion in investment.
Tesla hasn’t yet disclosed the starting date of the gigafactory’s construction or the start of vehicle production in the same factory. Per one of Reuters’ previous reports, the automaker has plans to start electric vehicle production in Mexico in 2025. Per the previous report, Tesla’s $25,000 electric car and the robotaxi were supposed to be built on a next-generation platform. The platform was supposed to make its debut at Gigafactory Mexico but that looks unlikely.
Reportedly, the company has decided to relocate the initial production of their next-generation EV from Mexico to Austin. As a result, both the development and initial manufacturing phases will now be centered at the Texas Gigafactory.
2. Ford, Honda, and BMW's joint venture — ChargeScape — is aimed at creating a single, cost-effective platform, bridging the gap between EV drivers, automakers and utility companies. ChargeScape seeks to streamline interactions between automakers and electric utility providers. This platform will provide North American grid-managing utility companies access to a potentially universal energy pool stored in EV batteries, taking advantage of bidirectional charging capabilities. With many EVs equipped with bidirectional charging, these vehicles can both draw and feed energy back to the grid.
This two-way energy flow positions EVs not only as transport vehicles but also as pivotal contributors to energy stability. Ford, BMW, and Honda's venture, ChargeScape, aims to optimize this, eliminating the need for multiple negotiations with utility providers. The move will simplify logistics for automakers and utilities, making energy from various EVs accessible through a single platform. EV owners can also benefit from ChargeScape, using it to optimize charging times and potentially share their vehicle's energy with the grid during peak demand, contributing to grid stability and renewable energy utilization.
3. Copart reported fourth-quarter fiscal 2023 (ended Jul 31, 2023) adjusted earnings per share of 34 cents, beating the Zacks Consensus Estimate of 31 cents. The bottom line also increased 21.4% year over year. The company generated revenues of $997.6 million, beating the Zacks Consensus Estimate of $950 million. The top line also increased by 12.9% from the year-ago reported figure. CPRT currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CPRT’s fiscal fourth-quarter service revenues came in at $834.2 million, up from $707.8 million recorded in the year-ago period. Service revenues outpaced our estimate of $784.8 million and accounted for 83.6% of the total revenues. Vehicle sales totaled $163.3 million in the quarter, down from the prior year’s level of $175.6 million. The figure, however, surpassed our estimate of $156.9 million.Copart had cash, cash equivalents and restricted cash of $957.4 million as of Jul 31, 2023 compared with $1,384.2 million as of Jul 31, 2022. Long-term debt rose to $10.9 million at the end of the reported quarter from roughly $2 million as of Jul 31, 2022.
4. For the 2024 model year, Ford is expanding its F-150 lineup with more hybrid powertrain choices for various trims, introducing optional features like a heads-up display and a built-in 5G modem. In the first half of 2023, Ford experienced a 28.1% increase in hybrid truck sales, with hybrids now accounting for 10% of all F-150 sales. For 2024, Ford plans to double the availability of hybrid trucks to make this technology more accessible to customers.
The PowerBoost hybrid option for the F-150 will be priced at the same level as the 3.5-liter EcoBoost engine. A 5G modem, previously exclusive to SuperDuty pickup trucks, will be included in the new F-150, as well as the upcoming Lincoln Nautilus SUV. Ford's over-the-air updates will be available for automatic software installations, and a voice feedback option will enable quick reporting of technical issues. The F-150 will feature the latest Sync 4 software on a 12-inch infotainment display. Additionally, Ford is introducing Stolen Vehicle Services in North America.
5. BMW announced plans to invest $750 million in a U.K. facility. The money will be utilized to revamp the Oxford plant to produce a fully electric Mini. BMW plans to electrify its Mini brand by 2030. In 2021, the BMW Group marque Mini revealed its intention to discontinue the sale of gas cars entirely by 2030. The automaker will start manufacturing two electric cars at its Oxford plant from 2026. These two models are the Cooper 3-door and the compact crossover Mini Aceman. Milan Nedeljkovic, production chief of BMW, said that the company wants to use made-in-Europe batteries in the new models.
The German carmaker said that the production volume will become entirely electric by 2030 and the investments in the Swindon, Hams Hall and Oxford plants will cross $3 billion since 2000. The Oxford facility has been manufacturing electric Mini’s since 2019 but will turn 110 this year. The assembly of the Cooper 3-door and Aceman will begin in China and models will be ready for export by early 2024.
Price Performance
The following table shows the price movement of some of the major auto players over the last week and the six-month period.
Image Source: Zacks Investment Research
What's Next in the Auto Space?
Stay tuned for updates on the UAW strike against the Detroit 3 automakers. Industry watchers will keep a tab on August new car registration data to be released by the European Automobile Manufacturers Association soon.
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