FYI: Elon Musk’s focus has shifted dramatically from electric vehicles to artificial intelligence, impacting Tesla’s stock and market positioning.
Good morning! It’s Tuesday, July 23, 2024. Welcome to your daily roundup of top automotive news from around the globe. Here’s what you need to know:
1st Gear: Musk Prioritizes AI Over Electric Cars
Tesla CEO Elon Musk has a knack for driving his company’s stock prices with his vision and oratory skills. Recently, Musk shifted the focus from Tesla’s electric vehicle (EV) market to the future potential in artificial intelligence (AI).
Despite a 43% drop in stock price by late April, Tesla’s market capitalization remarkably soared by $386 billion in just 11 weeks, thanks to Musk’s AI-focused narrative. While current sales and profits have been lagging, Musk’s pivot has kept investors hopeful. Bloomberg’s reports hint at another challenging earnings season for Tesla, with anticipated declines in both sales and profits for the second successive quarter.
Adam Sirhan, CEO of 50 Park Investments, commented, "This narrative shift is crucial in justifying Tesla’s premium valuation compared to traditional automakers." Tesla’s high volatility is largely attributable to Musk’s charismatic yet controversial management style. Speculators are preparing themselves for the upcoming earnings disclosure.
Trading options indicate an expected 8% stock price fluctuation based on the second-quarter results. Additionally, Musk has promised significant new model introductions and dangled the prospect of a cheaper Tesla car, although he has been cryptic about the details.
However, delays in Tesla’s robotaxi prototype unveiling, pushed back to October, triggered an 8.4% stock price drop earlier this month. Analysts like Seth Goldstein from Morningstar affirm that much of Tesla’s recent rally was AI-related.
Analyst expectations for Tesla’s second-quarter profits are around half of last year’s figures but have seen a slight uptick in the last month. Bloomberg’s data estimates a profit of 58 cents per share on $24.1 billion in revenue. Investors are keen to see if Musk can concurrently restore growth in the EV sector while advancing self-driving technology.
As Morgan Stanley’s Adam Jonas said, "Tesla has the key attributes to benefit from AI, but its auto earnings downgrades need to stabilize first."
2nd Gear: Porsche Faces Potential Production Halt Due to Aluminum Shortage
Porsche faces significant production challenges after severe flooding disrupted operations at a crucial aluminum alloy supplier’s facility. This unexpected event could cause the shutdown of one or more Porsche production lines, potentially lowering sales and profit forecasts for the luxury automaker.
Porsche confirmed that its suppliers have declared force majeure due to the flooding, which hampers their ability to meet contractual obligations. Analysts from Bernstein suggest that this could result in a production loss of at least 10,000 to 17,400 vehicles in the latter half of 2024, affecting Porsche’s recently successful IPO valuation.
Aluminum suppliers such as France-based Constellium and U.S.-based Novelis have faced similar flooding issues, hinting at the broader supply chain vulnerability Porsche is currently navigating.
Third Gear: GM Enjoys Strong Second Quarter
General Motors (GM) has reported an impressive second quarter, with a 14% increase in net income, totaling $2.9 billion. Revenues climbed by 7% to $47.9 billion, surpassing market expectations. The company adjusted its full-year earnings forecast upward to a range of $13 billion to $15 billion.
Adjusted earnings before interest and taxes rose 37% year-over-year to $4.4 billion. Meanwhile, GM’s net profit margin improved to 6.1% from 5.7%. Despite a 29% sales drop in China, GM North America posted a strong $4.4 billion in pretax profit.
GM sold 21,930 EVs in Q2 2024, breaking its record from the previous quarter. As GM gears up to launch more EVs later this year, it’s optimistic about meeting production goals even after reducing its 2024 target due to demand shifts.
CEO Mary Barra stated, "We had an incredibly strong first half, and we have the products, discipline, and strategy to drive our future success."
4th Gear: GM Wentzville Plant Shuts Down Amid UAW Strike
GM’s Wentzville Assembly Plant in Missouri halted production due to a strike by the United Auto Workers (UAW) at a key supplier, Lear Corporation. The strike affects approximately 500 union workers producing parts for GM vehicles.
GM is closely monitoring the situation, aiming for a swift resolution to resume normal operations and minimize customer impact. Lear Corporation emphasized their commitment to fair negotiations and reaching a beneficial agreement for all parties.
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Donald Smith, Editor of Automotive.fyi
