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Auto Stock Roundup: VWAGY-QuantumScape Deal, TSLA-Panasonic Pact & More

Zacks Equity Research
·6 mins read

With lockdown restrictions easing across states, auto biggies have been ramping up production to make up for lost production during the two-month shutdown. U.S. auto giant Ford intends to operate its assembly plants on pre-virus shift patterns effective today, ahead of the original target of Jul 6. General Motors also aims at being back at full capacity by the end of the month. Many auto retailers including CarMax and Sonic Automotive’s sales are improving after witnessing a massive decline in the last couple of months. Sonic Automotive’s same-store used and new vehicle sales from the EchoPark unit are registering a year-over-year increase during the month of June. CarMax is also seeing an uptick in used unit sales and web traffic during the month. Firms are observing a gradual improvement in operating conditions and steadily increasing automotive retail consumer demand. 

(Read the Last Auto Stock Roundup here)

Recap of the Week’s Most Important Stories

1. Ford’s F Bronco SUV will make long-awaited debut on Jul 9, after getting delayed multiple times amid the coronavirus crisis. The launch, which is likely to happen via a digital platform, was initially scheduled for a March unveiling.The firm will be rolling out the new Bronco in two-door and four-door versions. Both these variants will have removable doors and roofs. There will be a second, smaller model, the Bronco Sport, in addition to the standard Bronco.Ford plans to suspend the production of Edge SUV, a move that could result in the closing of the Ontario factory in Canada.

Meanwhile, the company intends to offer its own hands-free advanced driver-assist systems, which will first appear as an option for the all-electric Mustang Mach-E. The technology — Ford Co-Pilot360 — offers a whole range of driver-assist features including Active Drive Assist, its hands-free driving system. The firm plans to offer 250 kWh of free charging to new Mustang Mach-E owners when the model goes on sale by the end of this year. The complimentary charging will be done through the recently-expanded FordPass Charging Network.

2. Volkswagen VWAGY is pumping another $200 million in solid-state battery specialist, QuantumScape. This would bring the German auto giant’s total investment in the Silicon Valley-based battery startup to more than $300 million. The investment will enhance the development of solid-state battery technology that aims to deliver greater range and shorter charge times for EVs, which is the key to take e-mobility to mainstream. 

Meanwhile, it will obtain the full ownership of Audi for $267 million. Per media sources, Volkswagen specified that it has set the cash settlement to be paid to minority shareholders in return for the transfer of their shares at 1,551.53 euros per Audi AG share. The share transfer will be completed at Audi's upcoming yearly general meeting later this summer. 

3. Nissan Motor NSANY has redesigned its best-selling Rogue SUV, which is part of a major restructuring program announced by the Japan-based carmaker in May. The new-generation Nissan Rogue SUV — also known as X-Trail — sports a sleeker look, improved power and advanced technology, including an upgraded version of the company's ProPilot Assist driver-aid system.

The 2021 Rogue — scheduled to go on sale this fall — will be offered in three grades (S, SV and SL), likely starting at a higher price than the current car. The starting pricing for the current vehicle ranges from $23,000-$32,000. It is the first of the five new or revamped vehicles in the United States for Nissan in the coming year.

4. CarMax Inc. KMX posted first-quarter fiscal 2021 (ended May 31, 2020) net earnings per share of 3 cents against the Zacks Consensus Estimate of a loss of 6 cents. A profit of $1.59 per share was reported in the year-ago quarter.Net sales in the reported quarter decreased 39.8% year over year to $3,228.8 million. The top line, however, beat the Zacks Consensus Estimate of $2,607 million. Total gross profit slid 52.3% year over year to $354.2 million.

It had cash and cash equivalents of $658 million as of May 31, 2020, and $1.08 billion of unused capacity on the credit revolver. Long-term debt amounted to $1,705.1 million, reflecting a decrease from $1,789.5 million in the year-ago period. In the wake of coronavirus-induced uncertainty, CarMax put the brakes on the stock buyback program.

5. Tesla, Inc. TSLA has entered into a three-year deal with Panasonic, per which the Japan-based battery maker will manufacture and supply 2170 lithium-ion battery cells at its Gigafactory in Nevada. The deal — effective Apr 1, 2020 through Mar 31, 2023 — covers the terms of Panasonic’s production capacity commitments and Tesla’s purchase volume commitments for the first two years of the agreement. 

Meanwhile, Tesla appears to be facing major production issues with the current Model Y. Consumers in the United States are reluctant to purchase the battery-electric SUV and in some cases, refusing deliveries as well. The defects reportedly cover a variety of areas, including paint and trim issues, seat indentations and a loose seat belt.

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, Ford and General Motors have declined the most. In the past six months, all the stocks have slid except Tesla.

What’s Next in the Auto Space?

Watch out for usual news releases and further updates on the impact of the COVID-19 pandemic on the auto sector.

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Ford Motor Company (F) : Free Stock Analysis Report
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Volkswagen AG (VWAGY) : Free Stock Analysis Report
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