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Auto Stock Roundup: Volkswagen Recalls, Harley-Davidson's 2020 Lineup & More

Zacks Equity Research

Last Friday, it was reported that China intends to resume tariffs on U.S. cars and auto parts/components that it had discontinued in April. Beijing plans to impose 25% tariff on U.S. cars and 5% on auto parts, effective Dec 15, 2019. Notably, U.S. vehicle exports to China became half when the latter had imposed retaliatory tariffs last year. Escalating trade tensions between the United States and China, with the latter planning to restart levies on American autos, may dent the prospects of U.S. auto biggies in Chinese markets.

On the news front, German automaker Volkswagen AG VWAGY issued a recall of roughly 679,000 vehicles in the United States for a rollaway problem. Meanwhile, American motorcycle giant Harley-Davidson, Inc.HOG unveiled the details of new motorcycle models and technologies for 2020.

Recap of the Week’s Most Important Stories

1.    Volkswagen issued a recall of roughly 679,000 vehicles in the United States and 117,000 cars in Canada to fix an electrical issue that could result in a potential rollaway problem.

The German automaker revealed that silicate may build up on the shift lever micro switch, allowing drivers to remove the key from the ignition without the vehicle actually being in park. The problem could cause the vehicles to roll away unexpectedly, thereby increasing the possibility of a crash or injury. The recall affects model-year between 2011 and 2019 including Jetta, Beetle & Beetle Convertible, Golf, Golf SportWagen, and Golf GTI. The bulk of the affected vehicles include the 2011-2018 Jetta models. (Read More: Volkswagen Recalls Vehicles for Rollaway Problem)

2.    In sync with long-term growth objectives to expand product portfolio and customer base, Harley-Davidson recently unveiled the details of its new motorcycle models and technologies for 2020. The Milwaukee-based company is planning to release new products that better align with market trends and the tastes of younger generations.

Some of the new models to watch out for in 2020 include LiveWire, Low Rider S and CVO Tri Glide. In a bid to establish itself as the leader in the electrification of motorcycles, Harley-Davidson will be launching the high-tech LiveWire, which will be its first attempt in electric two-wheelers. On the tech front, Harley-Davidson will be equipped with the H-D Connect cellular connectivity service and Reflex Defensive Rider Systems (RDRS) technologies.The new product launches will be in sync with its “More Roads to Harley-Davidson” growth plan, which was unveiled last year. (Read More: All You Need to Know About Harley-Davidson’s 2020 Update)

3.    Reportedly, Tesla, Inc. TSLA is set to lift vehicle prices in China this week itself, amid escalating U.S.-Sino trade tensions. The price raise, which was earlier scheduled for September, is likely to come into effect on Aug 30, owing to the tit-for-tat tariff fight between the United States and China, along with a decline in the yuan. 

The U.S. auto giant is reportedly mulling to hike prices again in December, if China follows through its plans to reimpose 25% tariff on U.S. cars and 5% on auto parts, which it had discontinued in April.

Tesla plans to start production in China, once it completes the construction of the Gigafactory 3 plant in Shanghai. Notably, the firm is in advanced talks with South Korea’s LG Chem Ltd. to buy batteries for the electric vehicles manufactured at the Shanghai plant, according to reports.(Read More: Tesla to hike Prices in China, In Talks with LG Chem)

4.    In a bid to enhance electrification capabilities, Dana Incorporated DAN recently acquired Canadian e-powertrain integrator, Nordresa Motors. This buyout will boost Dana’s business by integrating its portfolio of motors, inverters, chargers, gearboxes and thermal-management products with Nordresa’s battery-management system, electric powertrain controls, and integration expertise. The U.S. auto parts manufacturer will benefit from Nordresa’s expertise in designing and integrating EV systems, which will enable Dana to offer a complete system solution including fully-integrated e-Axles, battery and powertrain controls, and thermal management.

On the other hand, the transaction will expand Nordresa’s global footprint and customer base, thereby creating long-term value for customers. Notably, Nordresa's founders will serve in leadership positions at Dana. (Read More: Dana Boosts Portfolio Via Acquisition of Nordresa)

5.    Reportedly, the future of the joint venture between Ford Motor Company F and Chinese automaker Zotye is in limbo. The U.S. automaker and Zotye had teamed up for electric vehicles production in 2017 but the partnership has not turned out to be as fruitful as expected.

Ford currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

On Notably, the vehicle sales in China have been on the decline amid macroeconomic headwinds and the situation is unlikely to improve anytime soon, which has certainly affected the Ford-Zotye JV. Zotye failed to meet the targets in 2017 and 2018 as Zotye was hit by the lack of product development capabilities. The company, which is caught up in the China auto slump, expects to incur loss in the first half of 2019. Ford and Zotye are comprehensively re-evaluating their pact and conducting an overall appraisal of their cooperation, per reports. (Read More: Is the Future of Ford & Zotye JV Mired in Uncertainty?)

Price Performance

Company

Last Week

Last 6 Months

GM

-2.6%

-7.8%

F

-2.1%

2.4%

TSLA

-3.9%

-26.9%

TM

-0.8%

8.3%

HMC

-1.8%

-17.3%

HOG

-4.8%

-18.7%

AAP

-1.2%

-14.9%

AZO

-2.4%

18.1%

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 the stocks have declined, with Harley-Davidson being the worst performer. In the past six months, Tesla has declined the most, while AutoZone, Inc. AZO has recorded the maximum gain.

What’s Next in the Auto Space?

Car enthusiasts will be keeping a close watch on August 2019 U.S. car sales, which will be coming out early next week. Investors interested in the auto sector would be closely tracking the monthly sales reports of auto biggies like Honda, Hyundai and Toyota, among many others.

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Ford Motor Company (F) : Free Stock Analysis Report
 
Tesla, Inc. (TSLA) : Free Stock Analysis Report
 
AutoZone, Inc. (AZO) : Free Stock Analysis Report
 
Dana Incorporated (DAN) : Free Stock Analysis Report
 
Harley-Davidson, Inc. (HOG) : Free Stock Analysis Report
 
Volkswagen AG (VWAGY) : Free Stock Analysis Report
 
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