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Auto Stock Roundup: Ford Q3 China Sales Dip, Tesla Q3 UK Sales Hit a Record & More

Zacks Equity Research

The United Auto Workers’ (“UAW”) nationwide strike against General Motors GM, which has completed a month, is likely to end soon as the negotiating parties have managed to reach a tentative labor deal. Notably, the strike was called after the company’s four-year contract with workers expired on Sep 15 without any agreement on replacement. Notably, this marks the first major work stoppage at General Motors in the last 12 years and the longest national strike in the United States since 1970.

The tentative labor deal to end the stoppage still needs to be ratified and requires an approval from the local union leaders and workers carrying picket signs. The details of the deal are yet to be finalized, which may take around two more weeks. Until then, the strike will continue.

Reportedly, per the tentative deal, the union members with General Motors are likely to receive 3-4% raises or lump-sum bonuses each year. The contract also requires the U.S. top carmaker to inject around $9 billion in its manufacturing operations, including investment in an all-electric pickup.

(Read the Last Auto Stock Roundup here).

Recap of the Week’s Most Important Stories

1.    Ford’s (F) sales in China fell 30.3% in the third quarter from the same period last year. It delivered 131,060 vehicles in China in the third quarter of 2019. During the quarter, sales of Ford, Lincoln and JMC indigenous brands totaled 77,443 vehicles, 11,618 units and 41,999 units, registering declines of 37.7%, 24.1% and 13.3%, respectively, from the same period last year. The decline in sales was primarily due to China V Emission Standard stock clearance actions. A weak auto market and trade-war politics continue to worsen Ford’s ongoing slump in China. (Read more:Ford's Sales Take a Hit in China, Decline 30.3% in Q3)
 

2.    Harley-Davidson, Inc. (HOG) temporarily stopped production and delivery of its new LiveWire electric motorcycles, after discovering an issue related to the vehicle's charging equipment. The company discovered a “non-standard” condition during the final quality check of LiveWire, which it started shipping to dealers in late September. Glitches found in the model prompted additional testing and analysis. The tests are progressing well. However, the company did not offer a timeline for resuming production. (Read more: Harley-Davidson Halts Production of LiveWire Motorcycle)

 

3.    Tesla’s (TSLA) vehicle sales in the U.K. in September and the third quarter were a record high. The major contributor was Model 3, which has become one of the bestselling cars in the market. In September, the company delivered 3,459 vehicles, which included 2,864 Model 3s. As a result, Tesla’s market share in the U.K. rose to 2.2%. In the third quarter, the company delivered 6,244 vehicles, which included 5,385 Model 3s. It delivered more vehicles in the third quarter than it did in all of 2018. Last year, it had delivered 3,372 vehicles in the U.K. (Read more: Tesla Witnesses Record Model 3 Delivery in the UK)
 

4.    Asbury Automotive Group, Inc. (ABG) acquired Mike Shaw Subaru, based in Thornton, CO. It is the company’s first dealership in Colorado and the first Subaru brand store. The purchase closed on Sep 30, 2019 for an undisclosed amount. Additionally, Asbury Automotive signed contracts to acquire two import stores, one in India’s polis market and another in a new market. Subject to satisfactory closing conditions, the acquisitions are scheduled to be closed in the third quarter. The stores are anticipated to generate approximately $175 million in combined annualized revenues. (Read more: Asbury Automotive Purchases Subaru Store in Colorado)

 

5.    Lithia Motors (LAD) has started a sell-from-home customer experience, powered by a proprietary technology. The technology is part of a “multi-faceted expansion of digital conveniences”. It builds upon buy-from-technology that the company launched in 2019. The technology is being  piloted in Pittsburgh and adjoining areas. It is available at Baierl.com, which has been named for the company’s Baierl division. The site utilizes a proprietary valuation algorithm. Activating sell-from-home technology will enable the company to better serve customers. (Read more: Lithia Motors (LAD) Initiates Sell-From-Home Experience)

 

Price Performance

The following table shows the price movement of some of the major auto players over the past week and six-month period.

All the auto stocks have rallied in the past week, with Harley-Davidson registering the maximum gain. Nonetheless, the American motorbike manufacturer has declined the most in the past six months.

 

Company

Last Week

Last 6 Months

GM

5.7%

-9.1%

F

5.2%

-5.0%

TSLA

6.1%

-4.9%

TM

3.1%

9.3%

HMC

4.1%

-7.1%

HOG

8.2%

-10.6%

AAP

4.4%

-7.2%

AZO

2.8%

5%

 

What’s Next in the Auto Space?

Industry participants will be waiting for new updates related to the UAW-General Motors strike. If General Motors’ workers approve the proposed labor contract to end the strike, the UAW bargainers are likely to use it as a template for negotiations with Ford and Fiat Chrysler. Meanwhile, investors are keenly awaiting third-quarter 2019 earnings reports of a host of auto companies including, Ford and Harley-Davidson, among others.

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Lithia Motors, Inc. (LAD) : Free Stock Analysis Report
 
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