Auto Roundup: TSLA & F's Game

Last week's major highlight was the ground-breaking deal between two auto titans Ford F and Tesla TSLA. The deal allows Ford to access more than 12,000 Tesla V3 superchargers in North America in 2024. Ford's adoption of Tesla's exclusive charging standard represents a momentous achievement, positioning Ford as the foremost major automaker to embrace this technology. Through this collaboration, Ford gains access to the expansive network of high-speed Superchargers in the United States, enhancing convenience and charging possibilities for their electric vehicle (EV) customers.

Leading truck engine maker, Cummins CMI also hit the headlines with its plans to acquire Faurecia's commercial vehicle manufacturing facilities and related activities in Roermond and Columbus for EUR142 million. Meanwhile, Cummins' spinoff Atmus made a strong market debut. Auto parts retailer AutoZone AZO reported mixed third-quarter fiscal 2023 results, with earnings beating estimates but sales missing the mark.

American Italian automaker Stellantis STLA made news with investment in Lyten's breakthrough Lithium-Sulfur EV battery tech. By partnering with Lyten, Stellantis is poised to drive clean, safe, and affordable mobility while contributing to the reduction of greenhouse gas emissions in the transportation sector. The combination of Lyten's innovative Lithium-Sulfur battery technology and Stellantis' expertise in the automotive industry sets the stage for a promising future in sustainable mobility.

1. Ford laid out its plan to profitably ramp up its EV production while parallelly growing its traditional operations. The company maintained its previous guidance of adjusted EBIT in the range of $9-$11 billion and adjusted free cash flow of around $6 billion in 2023. The auto giant targets an 8% EBIT margin on its EV units and expects to produce 2 million EVs annually by 2026.Ford has partnered with three lithium makers: Albermarle, SQM and Nemaska Lithium, from whom it is likely to have secured 90% of the required amount of lithium and nickel.As soon as BlueOval SK starts its operations in 2026, Ford suggests offering the cheapest electric vehicle batteries in the United States.

In other news, Fordis recalling more than 175,000 Bronco models from 2021 to 2023 due to a fault in the seatbelt latch. Per the National Highway Traffic Safety Administration's (NHTSA) notice, the seatbelt latch might be difficult to access and could potentially compromise the passenger's safety. A free fix will be available at Ford dealerships to address the issue. The dealers will add sliding clip latch stops to the seatbelts of the driver and the adjacent seat of the driver.

In another exciting development, Fordannounced a deal to add Tesla plugs to its current and future electric vehicles. Per the agreement, Ford users will get access to over 12,000 Tesla Superchargers across the United States and Canada starting early next year. Ford's existing owners will be able to charge their electric vehicles at Tesla Superchargers using an adapter, whereas its next-generation EV owners will not need an adapter to charge their vehicles at Superchargers. Ford's CEO Farley mentioned that the legacy automaker is committed to using a single U.S. charging protocol that includes Tesla's charger port, called the North American Charging Standard.

2.Cummins signed a Share and Asset Purchase Agreement with Faurecia, a French global automotive supplier and a FORVIA Group Company, to acquire two of the latter's commercial vehicle manufacturing facilities and related activities. The plants are situated in Roermond, Netherlands (Europe) and Columbus, IN and the purchase price for the deal is EUR142 million (roughly $153 million).The transaction will be financed with cash on Cummins’ balance sheet. It is subject to customary closing conditions and is expected to close by the end of the calendar year 2023.

The agreement will give Cummins access to additional technical and manufacturing resources to improve its current mixer portfolio. The added resources will help Cummins meet global emission regulations now and in the foreseeable future. The company intends to maintain its existing relationship with Faurecia in Brazil, India, China and South Africa.

In a separate development, Atmus Filtration Technologies Inc., a spinoff of Cummins, made its trading debut on May 26 at the New York Stock Exchange after successfully raising $275 million in an initial public offering. Carrying the ticker ATMU, Atmus’ shares witnessed a substantial 11% increase on the first day of trading, providing investors with a promising start and suggesting a bright future for the company as it embarks on its independent journey in the market.

With a diverse product portfolio and a global presence, Atmus is well-positioned to capitalize on the increasing demand for filtration solutions. The company's consistent financial performance and Cummins' majority ownership further contribute to its growth prospects.

3. AutoZone reported earnings of $34.12 per share for third-quarter fiscal 2023 (ended May 6, 2023), up 17.5% year over year. Earnings surpassed the Zacks Consensus Estimate of $30.84. Net sales grew 5.8% year over year to $4,090.5 million. The top line, however, lagged the Zacks Consensus Estimate of $4,102.8 million.

In the reported quarter, domestic commercial sales totaled $1,110.5 million, up from $1,044.3 million recorded in the year-ago period. Domestic same-store sales (sales at stores open at least for a year) rose 1.9%. Gross profit increased to $2,146.1 million from the prior-year quarter's figure of $2,006.4 million. Operating profit increased 9.3% year over year to $858.5 million.

As of May 6, 2023, AutoZone had cash and cash equivalents of $274.9 million, up from $263 million as of May 7, 2022. The total debt amounted to $7,340.5 million as of May 6, marking an increase from $6,057.4 million as of May 7, 2022.

4. Stellantis has made a strategic investment in Lyten, a Silicon Valley-based company known for its breakthrough Lithium-Sulfur EV battery technology. This investment aims to accelerate the commercialization of Lyten's innovative 3D Graphene applications for the mobility industry.

Lyten's tunable three-dimensional graphene material has shown impressive reductions in greenhouse gas emissions, making it a key player in the transition to sustainable mobility. Stellantis and Lyten will collaborate to develop advanced applications for lithium-sulfur-based EV batteries, vehicle lightweighting, and enhanced vehicle sensing solutions.

With this strategic investment, Stellantis Ventures, the corporate venture fund of Stellantis, demonstrates its dedication to investing in early and later-stage startup companies that develop innovative and sustainable technologies within the automotive and mobility sectors. This investment aligns with Stellantis' Dare Forward 2030 strategic plan, which aims to cut CO2 emissions in half by 2030 and achieve carbon neutrality by 2038.

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

Image Source: Zacks Investment Research

Various auto biggies will release their U.S. vehicle delivery numbers for May. Stay tuned for usual news updates.

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