Jalopnik – Tesla’s Aging Cars Aren’t Selling So Elon’s Making Promises About AI And New Models
Editors note: this article is worthwhile for this one quote:
In a lot of ways, Elon Musk has built a complete house of cards for his stock based on promises and ideas that’ll just get kicked further down the road. In the meantime, though, enjoy the meme possibilities.
See original article by Andy Kalmowitz at Jalopnik
Plus, an aluminum alloy shortage could force Porsche to idle model lines, General Motors posted record Q2 revenue and a strike has idled one of its truck plant
Good morning! It’s Tuesday, July 23, 2024, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.
1st Gear: Musk Is Prioritizing AI Over Electric Vehicles
If Tesla CEO Elon Musk is good at one thing, it’s getting his automaker’s share price to go up or down depending on his mood. Things like a battle for more control of the company, killing off a $25,000 electric vehicle and mass layoffs caused the stock to drop 43 percent as of late April
Since then, they’ve been on an absolute tear despite the fact there hasn’t actually been any really good news from the Austin, Texas-based automaker. Still, Tesla has been able to add over $386 billion to its market cap in just 11 weeks, thanks in large part to Musk and his pivot to artificial intelligence over electric cars. From Bloomberg:
The CEO managed to get investors to pay more mind to Tesla’s potential in a future dominated by artificial intelligence than its sluggish sales and earnings at present. His astute sense of what the market wants to hear and incessant salesmanship will be put to the test after the close, when the company is likely to post lower revenue for the second quarter in a row and a fourth-straight drop in profit.
“The real game-changer for Tesla’s valuation lies in Musk’s ability to convincingly position the company as a leader in AI and autonomous technology,” said Adam Sarhan, founder and chief executive officer at 50 Park Investments. “This narrative shift is critical for justifying Tesla’s premium valuation compared to traditional automakers.”
Tesla’s unpredictable shares have long been at the whims of the CEO’s charisma and controversy, and investors appear to be bracing for more of the same heading into another set of earnings.
Options trading implies the stock could be headed for an 8% move in either direction off the second-quarter results, with Musk likely to further address Bloomberg’s July 11 report that the company had postponed an unveiling of robotaxi prototypes that had been slated for August.
While Musk has confirmed that he asked for “an important design change” to the front of the vehicles, he didn’t elaborate on the alteration or say how much extra time the company needed to get the cars ready.
“Tesla’s Q2 print will likely be a tough call for investors given all the moving parts,” said Tom Narayan, an equities analyst at RBC Capital Markets who rates the shares the equivalent of a buy. “Some of this move is probably related to the upcoming robotaxi event. We expect it could help change the narrative on the stock and are big believers in the thesis, but wonder how much is already priced in.”
Musk got the stock rebound going by announcing the automaker would accelerate the introduction of new models as soon as late this year. He once again dangled the ideal of a cheaper Tesla in front of investors like a carrot. Still, he did not offer much detail.
The CEO was tight-lipped about details of those vehicles and also drew a line in the sand, telling investors they shouldn’t bet on Tesla’s stock unless they believe the company is going to “solve” autonomous-driving technology.
[…]
That said, Musk’s aggressive effort to tether Tesla’s fortunes to autonomy has had its drawbacks. When Bloomberg reported this month that the company’s robotaxi unveiling would be delayed to October, the stock fell 8.4%, its biggest one-day drop since January.
“The selloff that we saw when Musk delayed the event tells me that a lot of the recent rally has been AI-related,” said Seth Goldstein, equities strategist at Morningstar.
[…]
Analysts’ average estimate for Tesla’s second-quarter earnings is roughly half what it was a year ago, though projections did inch higher in the past month, likely as a result of better-than-anticipated vehicle sales reported on July 2. The company is now expected to report a profit of 58 cents a share and revenue of $24.1 billion, according to data compiled by Bloomberg.
While many analysts point to Tesla’s AI potential as the biggest support for the stock, investors still want Musk to revive growth at the EV business while engineers work on self-driving technology. Tuesday’s results will shed light on how the company is executing on these near and long-term objectives.
“Tesla has significant attributes to be valued as an AI beneficiary, but the company must see a stabilization in the negative earnings revisions within the auto business first,” said Morgan Stanley’s Adam Jonas, who has the equivalent of a buy rating on the stock.
In a lot of ways, Elon Musk has built a complete house of cards for his stock based on promises and ideas that’ll just get kicked further down the road. In the meantime, though, enjoy the meme possibilities.
3rd Gear: GM Had A Great Second Quarter
General Motors just put up some really strong numbers for the second quarter of 2024, easily beating expectations with Q2 net income up 14 percent year over year to $2.9 billion. Net revenue was also up 7 percent over last year to $47.9 billion. Those are some big boy numbers. From The Detroit News:
For the second consecutive quarter, GM increased its guidance for the year to adjusted earnings in the range of $13 billion to $15 billion, up from $12.5 billion to $14.5 billion. GM also increased its adjusted automotive free cash flow to a range of $9.5 billion to $11.5 billion, up from $8.5 billion to $10.5 billion. The financial guidance includes capital spending of $10.5 billion to $11.5 billion.
The automaker expects its net income for the year will be between $10 billion and $11.4 billion, slightly below the $10.1 billion to $11.5 billion previously forecasted.
GM reported adjusted earnings before interest and taxes of $4.4 billion, up 37% year-over-year. GM’s adjusted earnings per share of $3.06 was above the average Wall Street estimate of $2.72. GM’s revenue also beat the Street’s average estimate of $45.3 billion. GM’s net income margin for the quarter was 6.1%, up from 5.7%.
Pretax earnings in GM North America totaled $4.4 billion in the quarter. GM International’s pretax earnings were $50 million. GM reported a $104 million loss of equity income in China after the automaker and its partners reported a 29% drop in sales there in the second quarter. GM and other U.S. automakers are struggling in the country with increasing domestic competition and changing consumer behavior there.
Having such a strong second quarter helped GM to post a really robust first half of 2024. It’s nice to see a small automaker like General Motors winning every once in a while.
For the first half of 2024, GM’s net income of $5.9 billion was up 19% year over year on revenue of $90 billion, which was up 7%.
“It was truly a great first half,” GM CEO Mary Barra wrote in a letter to shareholders. “And we have the products, discipline and strategies to drive future success.”
The results come after GM in early July posted the best quarter for U.S. sales since the fourth quarter of 2020. GM’s U.S. dealers sold 696,086 new vehicles from April through June compared with 691,978 vehicles a year ago. In the first half of 2024, GM sold 1,290,319 vehicles, down 0.4% year-over-year.
GM’s second-quarter EV sales of 21,930 surpassed the previous record of 20,000 sold in the first quarter of 2023. It sold 38,355 EVs through June.
While prepping for multiple EV launches in the second half of the year, GM in June narrowed its 2024 EV production goal by at least 50,000 units to between 200,000 and 250,000, down from 300,000.
Jacobson said the move was “100% demand driven” since the automaker overcame issues it had with battery module supply and had been “on track” to produce 300,000 EVs this year.
GM expects by the fourth quarter that its EVs will be variable profit-positive, meaning it’s able to cover the cost of producing the vehicles, when about 200,000 are produced.
Ford is set to release its second-quarter earnings on July 24, and Stellantis will follow suit on July 25.
See original article by Andy Kalmowitz at Jalopnik
