Displaying items by tag: autos
A few weeks ago we ran a story about Apple planning for its own-branded car. At the time, most analysts thought Apple would wait until self-driving cars became a mainstream reality before doing so—which made it seem like it would be 5 years or so. Well, in what comes as a major announcement, Apple is close to finalizing a deal with Kia to produce a branded Apple car for them in the US. Morgan Stanley analyst Katie Huberty explained why this is so exciting in just four short sentences: “Smartphones are a $500bn annual TAM. Apple has about one-third of this market. The mobility market is $10 trillion. So Apple would only need a 2% share of this market to be the size of their iPhone business”.
FINSUM: Apple is not only the world’s biggest player in smart phones, but it has a fiercely loyal follower base. It is hard to imagine the company would not get to 2% market share in mobility within 3 years at the most. This is the kind of announcement that could propel Apple on a big run for the next few years.
The stock market is going to enter a new era as Joe Biden—in all likelihood—becomes president. As that happens, investors need to start thinking about how to align their portfolios. While all industries will likely be affected to some extent, there are a handful that might be impacted the most acutely, such as energy, autos, tech, manufacturing, agriculture, banking, pharma and healthcare. In autos, Biden’s push for more efficiency will likely benefit Tesla and GM, both of whom are looking to sell more electric vehicles. Tech looks like a real risk area as the chances for more data/anti-trust regulation look higher, though those could be somewhat mitigated by a red Senate. On the manufacturing front, Biden is expected to use government stimulus to boost domestic manufacturing, In banking, executives are bracing for more regulation, but changes are not expected at a fast pace, so nothing too shocking seems likely in the near-term. Pharma looks vulnerable as Biden is committed to bringing drug prices down; that said even Pharma companies don’t expect that Democratic policies will hurt their margins worse than Trump’s proposals. In insurance and healthcare, the picture is mixed. Insurers would almost certainly be challenged by increasing amounts of government coverage, but hospitals would likely benefit from providing care for millions of newly insured Americans.
FINSUM: Biden and the Democrats’ plans will reverberate through the market in the coming months, though not as much as they might if the Left grabs control of the Senate in January. Generally, we agree with that a divided government would be most beneficial to markets.
There has been a lot of gloom for the auto industry lately. With showrooms and dealerships almost completely shut, car buying has dropped off a cliff, leaving auto companies sitting on big inventories with little demand. However, early signs from China and Europe are showing that the lockdown may have led to pent up demand for cars. In one sense, there is natural pent up demand from the closure of dealerships, but more interestingly, there seems to be more demand than usual. This is because people are growingly afraid of public transportation—in some cases governments are warning against using public transit . This means people are seeking the relative safety of traveling in their own vehicles.
FINSUM: This idea of surplus demand for private vehicles because of fear of the virus makes perfect sense. Auto stocks undervalued?
Auto stocks have been wounded badly by the COVID lockdown. Car sales have plummeted as buyers do not go to dealerships, test drive etc. The future is not looking great either, as a long recession could crimp consumer spending and hit auto companies where it hurts most—on higher margin large vehicles (like SUVs). Interestingly though, a major Ford insider, COO Jim Farley, just picked up $1m of shares in the embattled company. It was his first open market purchase since at least 2007.
FINSUM: This is a really strong signal from a guy who has been with the company for some time.
The car industry has not been doing so well over the last few years. After seeing a big surge in sold vehicles leading up to 2015, sales have fallen off and the industry has been in a slump. If demographics are any sign, things aren’t going to get much better any time soon. New data shows that the average car buyer is getting older, and worse, cars are staying on the road longer, hurting companies’ all important replacement cycle. In terms of the total number of cars sold in October, the US is back in the same territory as it was in 2002.
FINSUM: There is no point denying it—a lot of car prices have risen dramatically over the last two decades (versus salaries), so it is no wonder average buyers are getting older and cars are being held longer. More than half of buyers are now over age 55!