TSLA’s Autopilot Probe, THO’s Earnings Beat Streak & More


China Association of Automobile Manufacturers (CAAM) released vehicle sales data for May. Vehicle sales in China declined 12.6% year over year to 1.86 million units but rose around 57% from April volumes. The month-over-month improvement could be attributed to stimulus packages offered by the government in an effort to revive the market. Per CAAM, sales for the first five months of 2022 contracted 12.2% year on year. In contrast, sales of new energy vehicles (NEVs) rose around 114% year over year in May. Sales also rose 49.5% from April levels. For the January-May period, sales of NEVs rocketed 114.2% on a year-over-year basis.

On the news front, the recreational vehicle (RV) maker Thor Industries THO delivered the ninth straight earnings beat in the fiscal third quarter of 2022. Meanwhile, China-based electric vehicle (EV) maker NIO Inc. NIO incurred first-quarter 2022 loss, albeit narrower than the year-ago levels. EV king Tesla TSLA came under the US federal regulators’ scrutiny over an investigation into its Autopilot feature that has resulted in multiple crashes and one fatality in recent times. Germany’s legacy automaker Volkswagen VWAGY made news as it opened its first-of-its-kind Battery Engineering Lab in Tennessee to conduct extensive research on EV batteries and expedite its e-mobility efforts. Finally, Goodyear Tire GT also made the headlines as it announced the recall of two-decade-old 173,000 G159 RV tires that have been causing serious troubles in the operation of RVs.

Last Week’s Top News

Thor posted adjusted earnings of $6.32 per share for the third quarter of fiscal 2022, beating the Zacks Consensus Estimate of $4.97. This outperformance can be attributed to higher-than-anticipated revenues across North American Towable and Motorized RVs segments. The bottom line jumped 92% from the year-ago profit of $3.29 per share. The company registered revenues of $4,657.5 million for the quarter under review, topping the Zacks Consensus Estimate of $4,173 million. The top line also surged 34.6% year over year.

Revenues from the North American Towable segment came in at $2,640.1 million, surging 53% year over year and surpassing the Zacks Consensus Estimate of $2,263 million. Revenues from the North American Motorized segment totaled $1,053 million, which soared 35.8% year over year and also outpaced the consensus mark of $986 million. However, sales from the European RVs unit totaled $724 million, down 19% from the year-ago period and also missed the consensus mark of $870 million.  As of Apr 30, 2022, Thor had cash and cash equivalents of $331.9 million and long-term debt of $1983.6 million. The consolidated backlog as of quarter-end was $13.88 billion, reflecting a year-over-year decline of 3%.

Tesla has landed in a tough spot as the United States federal regulators escalated their investigation into the company’s Autopilot function. The Autopilot feature has resulted in more than a dozen cars crashing into parked first-responder vehicles over a span of four years. The 16 crashes, which spurred the investigation, took place between January 2018 and January 2022 and resulted in 15 injuries and one death.Most of these incidents occurred after dark, when the software ignored scene control measures, including warning lights, flares, cones and an illuminated arrow board.

The National Highway Traffic Safety Administration (“NHTSA”) reported that it would upgrade its preliminary investigation, which began last August, to an engineering analysis, which is the final step before the agency decides on a recall. The investigation, representing nearly 830,000 vehicles in the United States, includes all four Tesla vehicles – Models Y, X, S and 3.

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

NIO reported first-quarter 2022 loss per American Depositary Share (ADS) of 18 cents, narrower than the year-ago loss of 48 cents amid higher operating expenses. The company posted revenues of $1,563 million, up 24.4% year over year on the back of robust deliveries. NIO delivered 25,768 vehicles in the first quarter of 2022, including 4,341 ES8s, 13,620 ES6s, 7,644 EC6s and 163 ET7s. Total deliveries surged 28.5% year over year.

The vehicle margin for the reported quarter was 18.1% compared with the year-ago period’s 21.2%. Cash and cash equivalents totaled $2,508.2 million as of Mar 31, 2022. Long-term debt was $1,753.4 million. NIO expects second-quarter 2022 deliveries in the band of 23,000-25,000 vehicles, signaling a year-over-year uptick of 5-14.2%. Revenues are envisioned between $1,473 million and $1,591 million, indicating a year-over-year increase of 10.6-19.4%.

Volkswagen opened its Battery Engineering Lab (BEL) in Chattanooga, TN, to carry out testing of batteries for EVs in the American marketplace.BEL is VWAGY’s first-of-its-kind facility and one of the four strategically located units globally, with the others located in Braunschweig, Germany and Shanghai and Changchun in China. It will empower the company to respond to the surging EV boom and hone its local engineering skills. The lab’s focus on sustainability is a highly-specialized feature. When batteries are discharged during testing, the energy produced will be transferred back into the building, which will recycle the local public grid and scrapped materials.

The company has invested $22 million in the sprawling facility, which will enable it to have an edge in the electric mobility space. It already has an existing electrification factory in Chattanooga, with an investment of $800 million. Volkswagen has pledged $7.1 billion in investment to boost its product portfolio, R&D and manufacturing capabilities in the North American region.

Goodyear announced that it is recalling around 173,000 G159 tires used in RVs. The NHTSA has stated that the tires experienced high chances of failure on RVs compared to other similar tires, which can be a potential cause of serious injury or death. The tires were produced between 1996 and 2003 and are no longer in production. However, there stands a chance that the tires are still prevalent in online marketplaces. There is also a possibility that some RV owners may have the tires on their vehicles or kept aside as a spare and are unaware of the issue.

The NHTSA has received 10 consumer complaints on the failure of Goodyear G159 tires on motor homes, with two complaints of a crash. Tire defects have also led to deaths for which lawsuits have already been filed. While previously Goodyear had probably turned a deaf ear to the allegations, this time it has agreed to act upon the issue and offer mitigating solutions. Drivers with the affected tires can get a free replacement from Goodyear Commercial Tire and Service Network’s location or an authorized Goodyear commercial truck tire dealer immediately.

Price Performance

The following table shows the price movement of some of the major auto players over the last week and six-month period.

Zacks Investment Research

Zacks Investment Research

Image Source: Zacks Investment Research

What’s Next in the Auto Space?

Industry watchers will keep a tab on May 2022 passenger vehicle registrations to be released by the European Automobile Manufacturers Association soon.  Also, stay tuned for any update on how automakers will tackle the semiconductor shortage — aggravated by the Russia-Ukraine war and rising COVID-19 infections — and make changes in their business operations.

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