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Auto Stock Roundup: Xi Jinping to Slash Auto Tariffs, VLKAY to Replace CEO

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Last week, providing some relief to the growing tension between the U.S. and China, Chinese President Xi Jinping revealed his plans to significantly slash import tariffs on foreign autos and lower duties on other products. Since China accounts for a large part of U.S. auto exports, the comments of Jinping cheered U.S. automakers.

On a different note, German auto giant, Volkswagen AG VLKAY plans to replace its CEO Matthias Mueller, per Reuters. The company is taking such a decision because it intends to move past the troubling effects of diesel emissions scandal. Mueller will be replaced by Herbert Diess, who presently runs the Volkswagen brand.

The automaker has struggled a lot on account of the diesel emissions scandal. Mueller’s exit shows an attempt by the automaker to make a clean break from the scandal.

In another important development last week, Tesla, Inc. TSLA announced that it will recall total 8,898 Model S vehicles in China. This is part of the bigger recall announced by the electric vehicles maker in March 2018.

(Read the previous roundup here: Auto Stock Roundup for Apr 5, 2018)

Recap of the Week’s Most Important Stories

1. Per Reuters, Volkswagen plans to manufacture its first compact sport utility vehicle, T-Cross, in Brazil. With this recent development, the company hopes to recover its market share in the Latin American region.

Anticipated to hit the market by the first half of 2019, Volkswagen announced its plan to invest $595 million (R$2 billion) for the production of T-Cross at its Sao Jose dos Pinhais facility, located in southern Brazil. Further, it added that this investment is part of the R$7 billion planned investment through 2020. The investment is intended to facilitate the company in reviving its product lineup in Brazil.

Over the last 10 years, Volkswagen’s share in the Brazilian auto market has contracted amid recession and opening of local factories by new entrants. However, recent low interest rates and last year’s export-driven rebound in the sector revived hopes for a few auto manufacturers. (Read more: Volkswagen Aims to Expand in Brazil with First SUV)

Volkswagen carries a Zacks Rank #4 (Sell).

2. Fiat Chrysler Automobiles N.V. FCAU intends to part with its components business Magneti Marelli and distribute shares to its shareholders. The decision to separate Magneti Marelli, which is engaged in lighting powertrain and electronics, is in sync with the five-year business strategy that the company is set to unveil on Jun 1, 2018.

The move is expected to aid the Italian-American auto giant to concentrate on its core business. This will also provide the components business with the necessary operational flexibility to grow in the future.

The spin-off of Magneti Marelli, which employs around 43,000 people and has operations in 19 countries, is likely to be completed by the end of 2018 or in early 2019. Shares of the company are likely to be listed on the Milan stock exchange. However, completion of the spin-off is subject to certain tax and legal considerations as well as regulatory approvals.

Fiat operates as an international automotive company, engaged in designing, engineering, manufacturing, distributing and selling vehicles, components and production systems. In March 2018, the auto giant reported 13.6% growth in year-over-year sales to 216,063 units of vehicles in the United States. Sales growth of 44.7% from the SUV Jeep brand significantly pushed the metric up. (Read more: Fiat Chrysler to Go For Magneti Marelli Spin-off)

Fiat Chrysler sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

3. China’s quality watchdog announced that Tesla, Inc. TSLA will recall total 8,898 Model S vehicles in the mainland, per Reuters. The recall in China will commence from Jun 28, 2018. This is part of the broader recall, announced by the Palo Alto, CA-based electric vehicle-maker in March 2018.

Notably, in March, the company voluntarily announced the recall 123,000 units of the luxury Model S sedans across the globe to fix faulty steering components. The company informed that the recall includes Model S vehicles that were built before April 2016 and does not include any Model X or Model 3 versions.

Tesla also explained that excessive corrosion in the power steering bolts led to this recall. This glitch might result in reduced power steering. (Read more: Tesla Set to Recall 8,898 Model S Vehicles in China)

Tesla carries a Zacks Rank #3 (Hold).

4. Tenneco Inc. TEN announced its plan to purchase automotive supplier Federal-Mogul for $5.4 billion from Icahn Enterprises LP, run by the activist and investor Carl Icahn, per Reuters. Tenneco anticipates the deal to close later this year.

Auto parts manufacturer, Tenneco also intends to split the company into two independent, publicly traded entities in the second half of 2019. One will comprise the powertrain products while the other will include auto parts such as suspensions and axle dampers. Through this deal, Icahn Enterprises will receive $800 million in cash and 29.5 million shares from Tenneco.

Southfield, MI-based Federal-Mogul is an automotive supplier that offers quality products, trusted brands and creative solutions to manufacturers of automotive, light-commercial, heavy-duty and off-highway vehicles as well as to power generation, aerospace, marine, rail and industrial manufacturers. The company sells products under several brands, including Champion, Interfil and Goetze. Icahn Enterprises acquired the majority control of Federal-Mogul in 2008.

Lake Forest, IL-based Tenneco manufactures products, including catalytic converters, diesel-particulate filters and shock absorbers. (Read more: Tenneco to Buy Federal-Mogul From Carl Icahn for $5.4B)

Tenneco carries a Zacks Rank #2 (Buy).

5. General Motor Company’s GM Chevrolet brand announced that its next-generation 2020 Silverado HD will be introduced in 2019. The new model will join 2019 Silverado 1500 and the 2019 Silverado 4500/5500/6500HD, which are already available in the market.

Being one of the successful truck manufacturers, Chevrolet will offer newer and expanded range of Silverado models, enabling customers to choose from a pool of options, under the same brand.

The new 2020 Silverado HD is designed keeping in mind the need of heavy-duty truck customers. The on-road testing of the prototype is about to start soon. The model is scheduled to be available by third-quarter 2019 and will be manufactured at the company’s assembly plant in Flint, MI.

Earlier in March, the company introduced 2019 Silverado 4500HD, 5500HD and 6500HD models that are scheduled to hit the showrooms by the end of 2018. With importance given to ease of driving, these Silverado medium-duty trucks are designed for commercial customers.

Prior to this, in the Detroit Show held in January, General Motors launched its 2019 Silverado 1500 model.

General Motors carries a Zacks Rank #3.

Performance

Last week, Tesla stock witnessed the maximum rise. Advance Auto Parts, Inc. AAP recorded the maximum decline.

In the last six months, the maximum rise was recorded by Advance Auto Parts while Tesla’s shares declined the most.

CompanyLast WeekLast 6 Months
GM2.6%-15%
F0.9%-5.1%
TSLA4.9%-15.4%
TM0.0%3.6%
HMC1.6%16.4%
HOG-1.5%-9.8%
AAP-3.1%29.7%
AZO-2.0%2.8%


What’s Next in the Auto Space?

Watch out for the usual news releases of other auto companies over the next week.

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