Three big things in auto: China may win on EVs, ICE suppliers are undervalued and AI is in the mix
Written by Emily J. Thompson, Senior Investment Analyst
Updated: May 11 2024
0mins
Source: SeekingAlpha
- Automobile Sector Challenges:
- Tesla and other Western automobile companies acknowledge China's dominance in electric vehicles, leading to shifts in strategies towards autonomous driving.
- General Motors and Ford are scaling back EV targets, while Rivian Automotive and Lucid Group face challenges in profitability.
- Ford Motor is reducing battery orders due to losses, and the Biden Administration plans to increase tariffs on Chinese EV imports.
- Investment Implications:
- Investors are reconsidering exposure to ICE/hybrid-focused companies as EV strategies slow down.
- Despite AI potential in the auto industry, valuations remain low, with suppliers like Magna International emphasizing AI benefits in manufacturing.
- Q1 Earnings Season Highlights:
- ICE-skewed suppliers like American Axle, BorgWarner, and Phinia exceeded revenue estimates, hinting at potential market outperformance.
- Companies are shifting focus from EV/AV initiatives to enhance shareholder cash returns.
- Morgan Stanley's Top Picks:
- Morgan Stanley's top ten auto sector picks include Ford Motors, Tesla, Ferrari, and other companies based on preference.
- Global picks encompass Michelin, Honda Motor, CATL, and Toyota Industries among others.
- Quantitative Analysis:
- Auto-related stocks with a Seeking Alpha Quant Rating of Buy include General Motors, Volkswagen, BYD Company, and others, indicating investment opportunities.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
