Auto Stock Roundup: HMC's Takata Settlement, F & FCAU's Issuance of Recalls and More
Last week, the Recreational Vehicle (RV) Industry Association came up with the shipments data for July. Markedly, the RV industry delivered the strongest July performance in four decades. Pent-up wanderlust amid the coronavirus crisis seems to be breathing new life into the RV industry. Total shipments soared 53.5% year over year to 43,035 units. Towable RVs climbed 56.6% year over year to 39,160 units. This was mainly aided by a 76.4% surge in conventional travel trailers units. Motorhomes increased 27.4% year over year to 3,875 units for the month.
Meanwhile, top U.S. automakers General Motors and Ford announced that they are nearing completion of ventilator production ordered by President Trump in an attempt to fight the COVID-19 outbreak. With the production of vehicles getting back on track, Detroit automakers are gradually winding up their ventilator manufacturing operations.
(Read the Last Auto Stock Roundup here).
Recap of the Week’s Most Important Stories
Tata Motors TTM has set an ambitious target of reducing debt to near-zero levels in three years. The company — which has a net automotive debt of around INR 48,000 crore (or $6.5 billion) — intends to undertake strategic efforts to substantially deleverage the business and become free cash flow positive by fiscal 2022. Tata Motors’ chairman Chandrasekaran affirmed that debt reduction will be among the chief priorities of the company. The automaker will be focusing on sharpening brand portfolio, boosting sales, and enhancing service experience as well as sustainable mobility.
Honda Motor HMC has agreed to pay $85 million to settle a probe over defective Takata airbag inflators in some of its vehicles. The settlement concludes an investigation into the Japan-based automaker’s alleged failure to inform regulators and customers about the risk of explosion of the frontal airbag systems installed in some of its cars. The latest settlement will ensure that Honda implements new safety protocols to protect passengers and drivers. The company will not only replace all the remaining defective airbags but also upgrade airbag safety procedures to minimize the risk of rupture.
Ford F has issued a safety recall for Ford Explorer and Lincoln Aviator vehicles. The recall affects 491 vehicles in the United States and federal territories, 34 in Canada and three in Mexico. Affected 2020 models are equipped with front seatbacks that may have fasteners with incorrect torque on the side airbag and/or seatback module attachments. If the side airbag and seatback module are not fully secured, it could affect the trajectory of the side airbag deployment and may prevent or delay the airbag cushion from positioning correctly, thereby increasing the risk of injury during a crash.
Fiat Chrysler FCAU will recall around 132K vehicles to fix a stalling issue of diesel engines. Per the company, the magnetic material on a crankshaft position sensor wheel can come off over time, which may cut off a signal and cause the diesel engines to stall. Affected vehicles include certain Ram 1500 pickups, Jeep Grand Cherokee SUVs and Chrysler 300 sedans. All the affected models were built between 2014 and 2019. The recall is expected to begin on Oct 2. Dealers will be updating the software so that the engine doesn’t stall even if the crankshaft position signal goes haywire.
Daimler AG DDAIF is set to deliver 1,800 Mercedes-Benz Electric Vans to Amazon AMZN. This marks the biggest order of electric vehicles for Mercedes-Benz to date. The deal, which entails the delivery of 1200 Mercedes-Benz’s eSprinter and 600 eVito models, will be closed by 2020-end. With the deal, Mercedes-Benz has now joined its Climate Pledge and supports the initiative with its own Ambition 2039 initiative. In May 2019, Daimler announced the sustainable mobility plan named Ambition 2039 for its Mercedes-Benz cars, which marked the company’s continued efforts to make the auto sector emission-free. Within this initiative, Mercedes-Benz Cars aims to have a carbon-neutral new passenger car fleet in 20 years and expects to have plug-in hybrids or all-electric vehicles to make up more than 50% of its car sales by 2030.
Price Performance
The following table shows the price movement of some of the major auto players over the past week and six-month period.
In the past week, all stocks have declined apart from Tesla TSLA and Honda. In the past six months, shares of Tesla, Advance Auto Parts, Toyota and AutoZone have increased. Tesla has gained the most in the said period.
What’s Next in the Auto Space?
Car enthusiasts will keep a close watch on August 2020 U.S. car sales data, which is likely to come out this week. Investors in the auto sector would be closely tracking the monthly sales reports of auto biggies like Honda and Toyota, among many others.
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Ford Motor Company (F) : Free Stock Analysis Report
Honda Motor Co., Ltd. (HMC) : Free Stock Analysis Report
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Tata Motors Ltd (TTM) : Free Stock Analysis Report
Daimler AG (DDAIF) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
Fiat Chrysler Automobiles N.V. (FCAU) : Free Stock Analysis Report
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