It's another week and analysts keep their eyes on Tesla (TSLA) . by Ford (F) The latest electric vehicle moves have sparked a strong reaction, with one Chinese automaker coming under close scrutiny and others reacting to Uber's decision. (Uber) New partnership with GM's Cruise. (Managing director)
Something good for a bad Tesla
Despite being an American carmaker, Elon Musk's Tesla has found itself caught in the European Union's massive tariff situation.
On June 12, the European Commission announced that starting July 4, Chinese electric vehicles imported into the EU will face additional tariffs of up to 38.1%, on top of the 10% tariff already applied to all car imports. Although the penalties appear severe, not all Chinese carmakers will suffer the full impact.
BYD, Geely and state-owned SAIC were granted individual tariff rates thanks to their cooperation with the EC investigation.
Related: Tesla gets special treatment with EU tariffs on Chinese EVs
As a result, BYD vehicles are subject to a 17.4% tariff in the EU, while Geely vehicles, including Volvo and Polestar models made in China, pay a 20.1% tariff. SAIC, the current owner of the British MG brand, will pay a maximum tariff of 38.1%.
Tesla's involvement is due to the outsized role played by Tesla Shanghai, the Chinese subsidiary of the eponymous carmaker. Tesla's gigafactory in Shanghai manufactures the Model 3 and Model Y for the Chinese domestic market and other regions, including the EU.
On Tuesday, August 20, the European Commission announced that it plans to impose a 9% tariff on Teslas imported from China. EU officials claim that this percentage is fair due to Beijing's lower stake in foreign-owned companies.
Analysts reacted positively to the news.
Baird analyst Ben Kallo said in a research note the same day that the rate was better than analysts had feared. Kallo noted that the 9% Tesla will face will have little impact compared to other automakers (e.g., BYD’s 17.4% and SAIC’s 38.1%).
The 9% tariff rate is also in line with expectations from Barclays analysts. Analyst Dan Levy wrote in a note published August 20 that the combined 19% is better than that of Chinese automakers.
Barclays' Dan Levy maintained an equal weight rating and a $220 price target on Tesla shares, while Baird's Ben Kallo reiterated an outperform rating and a $280 price target.
XPeng's unremarkable career
On August 20, Chinese electric vehicle manufacturer XPeng (XPEV) In the second quarter of 2024, Xpeng posted losses and revenues that missed analysts' expectations. Last month, Xpeng signed a technical agreement with Volkswagen, which helped soften the impact of its losses.
In a statement, XPeng co-president Dr. Hongdi Brian Gu said the company's cost savings from “technical improvement and revenue from technical collaboration in (its) strategic partnership with Volkswagen” have helped boost its profit margin; however, this has not been enough in the eyes of analysts. In addition, XPeng executives outlined a schedule of new models to be launched from the second half of 2024 through 2026, plans to enter new markets, and further development in autonomous vehicle technology.
However, Xpeng is an exception compared to the rest of the Chinese automotive sector, as its shares have suffered a 52% price drop since the beginning of the year, compared to just 17% for its competitors. Taking this into account, analysts at several Western firms have reduced their target prices.
More about automotive:
- The Toyota Crown is a masterclass in cheap, quiet luxury
- Ford makes radical change that could anger loyal customers
- Gavin Newsom's electric vehicle mandate is under threat from the US Supreme Court
JPMorgan analyst Nick Lai lowered his firm’s price target for XPeng. Despite positive news about its VW partnership, Lai’s change for XPeng from $9 to $8 and Neutral rating were influenced by overly optimistic outlooks on sales volume and margins for the remainder of 2024.
In an Aug. 21 research note, Barclays analyst Jiong Shao also lowered his price target on XPeng to $7 from $8 and maintained an Underweight rating on its stock, noting that with new models on the way, the automaker will see increased spending and additional losses in the second half of 2024.
Bank of America analyst Ming-Hsun Lee reiterated his buy rating on XPeng but lowered his price target from $11 to $10. In his Aug. 21 note, Lee’s optimistic view on the Chinese automaker was boosted by the expansion of its sales outside the People’s Republic, which accounted for a significant amount of its sales by volume. The company is expected to grow in important regions such as Europe, where it is positioned as a high-end luxury brand.
Citi analyst Jeff Chung also maintained his neutral rating on XPeng but lowered the company's price target from $8.30 to $7.60.
The blue oval spins again.
To some outside observers, Ford's electric vehicle division, known internally as Model-e, has been a white elephant for the Dearborn-based automaker led by CEO Jim Farley.
While products like the Ford F-150 Lightning pickup truck, the Mustang Mach-E crossover and the E-Transit commercial van helped elevate the brand to second place as an EV brand in the U.S., just behind Tesla, the EV portfolio has also hurt its bottom line.
In the second quarter of 2024, Ford’s Model-e division reported an EBIT loss of $1.1 billion. However, on August 21, Ford executives revealed a game plan that would change its strategy on electrification, prioritizing products that can eventually make money for the automaker.
Related: Ford's EV plan may be Toyota's worst nightmare
In a move that will cost the brand $1.9 million, the Blue Oval is shifting from three-row electric crossovers to three-row hybrids, making hybrid versions of the popular Ford Super Duty pickup and going all-in on the next generation of smaller electric vehicles, which will be headlined by a midsize pickup truck arriving in 2027.
“It's really about being agile and listening to our customers' feedback,” Lawler told Automotive News in a statement.
“We looked at the evolution of the segment, the amount of competition, the needs of customers and then the size of the battery that needs to go into a pure electric vehicle, the cost structure, the price point; we couldn't put together a vehicle that met our requirements to be profitable in the first 12 months of launch.”
The announcement is welcome news for analysts. In a note published on August 22, Bank of America analyst John Murphy noted that the firm is “turning toward the light” and noted that its focus on strengthening its core brand (trucks, commercial vans and SUVs) presents good opportunities to reliably grow its earnings.
Bank of America maintained its Buy rating on Ford and maintained its $20 price target.
Uber (and Cruise) everywhere
On August 22, technology and transportation multinational Uber announced what it called a “multi-year strategic partnership” with Cruise, which will offer rides in its autonomous vehicles through the Uber ride-sharing app in 2025.
According to Uber and Cruise CEOs, the partnership aims to expand the reach of autonomous vehicles to as many people as possible. By partnering with Uber, the ride-sharing app with the largest user base, Cruise can attract the largest number of potential customers.
“Cruise is on a mission to leverage driverless technology to create safer streets and redefine urban life,” said Marc Whitten, CEO of Cruise. “We are excited to partner with Uber to bring the benefits of safe, reliable, autonomous driving to more people, ushering in a new era of urban mobility.”
Related: Uber's robo-taxi could be the next step in a sinister pattern
Analysts say this partnership could open a new door for both Uber and autonomous vehicle companies.
In an Aug. 22 note, Evercore ISI analyst Mark Mahaney wrote that he expects Uber to continue expanding robotaxi offerings on its ride-sharing platform as a way to expand its business alongside companies like Cruise and Waymo.
“Uber is the largest aggregator of ridesharing demand,” Mahaney said. “Therefore, autonomous vehicle companies looking to scale their businesses, increase utilization of their fixed assets, and generate a good return on their investments in autonomous vehicles will seriously consider partnering with Uber.”
As a result, these partnerships can result in “more bookings, more revenue and more profits.”
At the same time, Bank of America analyst Justin Post wrote Thursday that the Cruise partnership “reinforces” that robotaxi operators like Waymo will see the value in partnering with someone like Uber to increase passenger demand.
However, there is one potential robotaxi company that he doesn't see as part of the project.
“At this point, we don't expect Tesla to partner with Uber,” Post said. “But we think the increasing competition between amazon's Zoox, Cruise, Waymo, Tesla and others could drive more interest in partnerships.”
Bank of America maintains its buy rating on Uber, while Evercore ISI maintains its positive outperform rating.
Related: Veteran fund manager sees world of trouble ahead for stocks
