Motör City Madness
Sunrise — wrong side of another day. Wall Street’s sky-high, 6,000 miles away.
Don’t know how long I’ve been awake. The market’s wound up in an amazin’ state.
Hold on, I know this one… Motörhead?
Motörhead! Remember me now — Motörhead! Alright…
Every motorhead in the market must’ve been rubbernecking this morning, after everyone from Tesla (Nasdaq: TSLA) and Rivian (Nasdaq: RIVN) to Ford (NYSE: F) and General Motors (NYSE: GM) all raced into the headlines.
But … were they good headlines?
Welp. About that. For Tesla’s part at least, the talking heads are still ruminating over the automaker’s latest delivery numbers, which sure seemed impressive.
Tesla delivered 83,135 vehicles from its Shanghai plant in September. Compared to June’s record of 77,983 deliveries, the Shanghai facility looks like it’s firing on all cylinders… Though, as you EV investors know, these figures only tell one side of the situation.
We know how many Teslas were made in China … but how many of those were actually sold in China?
In September, Tesla started fulfilling European orders with vehicles produced in Shanghai, leading many folks to speculate that demand is waning in China. It might not sound like a big deal to shift some orders around, but c’mon: Who’s a bigger worrywart than Wall Street?
TSLA investors are wondering more and more if Tesla’s demand is faltering in the Middle Kingdom. Funny … it’s almost like Great Stuff mentioned all of this last Monday. So why is Barron’s late to the party and reporting this now?
Because the latest reports from China’s own BYD (OTC: BYDDY) are only inflaming those fears.
Competitor BYD delivered 200,973 cars in September, spitting right in the face of Tesla’s beloved delivery records. Patooey, ya suckers! And since we know over 70% of BYD’s vehicles are sold to customers in mainland China, that’s a whole lot more BYDs than Teslas.
I mean, there’s a reason why Buffett is siding with BYD over Tesla when it comes to the EV race, after all.
Now TSLA investors are eagerly waiting for the company’s earnings report on October 19 for more details on the China situation. But they’re not the only auto investors who are concerned about slowing demand…
Analysts over at UBS downgraded both Ford and GM, noting the usual rigamarole of macro conditions and recessionary risks.
But UBS isn’t just concerned about Ford and GM: It’s sounding the alarm for the entire auto industry:
While we continue to like GM’s EV momentum in 2023 with a strong (IRA-compliant) launch pipeline, the overall sector outlook for 2023 is deteriorating fast so that demand destruction seems inevitable at a time when supply is improving. We expect EPS to more than halve next year.
Speak about demand destruction!
Gee, now what could possibly be dampening that demand?
Let me answer that question with another question: What happened when Target (NYSE: TGT) finally got the inventory that customers wanted to buy during the pandemic? Back when consumers were much more able to buy random junk, thanks to those stimmy checks?
Yeah … it didn’t end well. Target’s taking the massive earnings L on heavily discounted inventory because: A, either shoppers don’t want those same goods anymore or B … they can’t afford them anymore. Extrapolate that to the auto industry, and you get a not-so-rosy picture for companies like Ford and GM.
If food, rent and the cost of existence are already too much for many folks to bear, how are those same people going to go out and buy new cars? Especially when it’s getting more expensive to borrow money for a new car, thanks to rising interest rates?
Simple: They’re not gonna buy that new car.
As far as UBS’ estimate that automakers are going to see their earnings drop by more than half, well, only time (and future earnings reports) will tell.
Now, as Ford and GM look to preempt and prepare for this demand drop-off … Rivian is just trying to survive, man.
The company recalled almost all of its vehicles this morning due to a potential loose fastener in the steering assembly, which can ruin the front alignment or lead to complete steering loss.
A total of 12,212 vehicles were recalled, which is a shame, really, because Rivian’s only ever made 15,300 vehicles. Like, ever.
Those are rookie numbers. You gotta pump those numbers up.
Even though Rivian estimates only 1% of those recalled vehicles have faulty assemblies … do you want to be the one holding the loose steering wheel? I don’t think so, Tim.
For an EV startup that’s eagerly trying to hold the attention of big-name, big-budget contractors like Amazon, the recall sure ain’t a good look, and Rivian investors know it. RIVN shares sank 10% on the news.
So what’s a motorhead-minded investor to do at a time like this? Sell all the auto stocks, hide under a rock and call it a day?
Nah. Not at all. While analysts are worried about automakers’ earnings over the short term, those same automakers are still investing in tech. They’re still dropping wads of cash on the tech that will shape the future automotive industry, such as lidar for self-driving cars.
Almost every carmaker is betting on this one company to bring lidar tech into the limelight: Audi alone is investing $16 billion … GM, $27 billion through 2025 … BMW, $35 billion.
Click here to see what all the hype is about.
And that’s all for today, Great Ones! Are any of you gearheads invested in the automaking dons of Detroit? Which EV maker do you think will come out on top in China? And what’s the deal with those Rivian recalls?
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Regards,
Joseph Hargett
Editor, Great Stuff