Tesla made headlines in 2022, but the top-performing auto stock had nothing to do with EVs
The Ferrari SP38 seen at Goodwood Festival of Speed 2022 on June 23rd in Chichester, England.
Martyn Lucy | Getty Images
This year wasn’t about which auto manufacturer stock performed the best. It was about which stock managed to escape the worst of the year’s selling pressure.
After significant growth in auto stocks in 2021, this year proved daunting with the EV startup bubble popping, low vehicle inventories and rising interest rates. That was in addition to fears of a recession and overall “demand destruction” for industry sales.
Many of the world’s largest automakers performed well financially this year, but it wasn’t enough to offset the outside economic concerns that their most profitable days may be behind them.
“We are preparing for a challenging FY23 outlook for auto earnings on demand decline (higher rates), deflation (lower price/mix) and unfavorable changes in the supply/demand balance for EVs,” Morgan Stanley analyst Adam Jonas wrote in an investor note earlier this month.
The FactSet Automotive Index, which includes automakers and aftermarket parts, is off about 38% so far this year, as of Tuesday’s close. All major automakers and EV startups experienced double-digit declines this year – partially or completely offsetting their gains in 2021.
Many once-promising EV startups were among the biggest losers, as some ran into capital troubles or couldn’t scale production as quickly as anticipated. Rivian, Lucid, Canoo and Nikola experienced 76% declines or more year to date.
Traditional automakers were able to temper their stock declines better than the EV startups. But America’s largest automakers – General Motors and Ford Motor – both experienced declines of more than 40%, barring any surprise rally to end the year. Others such as Stellantis, Nissan, Toyota and Volkswagen have declined more than 25%.
Ferrari wins by losing the least
The company with the smallest decline was Ferrari, which year to date is only down by about 18% − making it the year’s best-performing automaker stock.
What drove that performance? For starters, the storied maker of high-end sports cars isn’t like other automakers: it’s expected to sell roughly 13,000 of its jewel-like sports cars by year’s end − fewer than giants like General Motors sell in a day. But those coveted cars go out the door at an average selling price of around $322,000 each, according to FactSet estimates.
Even at those prices, the waiting list for a Ferrari is long. The company limits its annual production to preserve its pricing power and exclusivity, a happy situation that gives Ferrari exceptionally strong profit margins and ensures that its factory isn’t likely to be idled anytime soon.
Most Ferrari models were sold out for the year by early November, CEO Benedetto Vigna said during Ferrari’s third-quarter earnings call, and he anticipates no problem with demand in 2023 – no matter how the world’s economies behave.
Vigna has good reasons for that view. Ferrari has several new models on the way to keep that waiting list long, including its first SUV-like vehicle, a sleek V12-powered four-door called the Purosangue that starts at about $400,000 in the U.S. Even at that price – and even for a four-door Ferrari – demand is brisk. Although Ferarri won’t even begin shipping the Purosangue for a few months yet, the company temporarily stopped taking orders last month after it sold out the first two years of production.
“The company’s focus on the unique quality and performance of its vehicles is unwavering, and has driven a track record of resilient financial performance, as well as significant intangible brand value and a true luxury status,” BofA Securities analyst John Murphy told investors in a Dec. 13 note, reiterating a buy rating on Ferrari and a $285 price target.
The Tesla story
Then there’s Tesla, which has proven to be one of the best automotive stocks for investors in recent years thanks to its tech-like valuation from Wall Street. Shares of the EV maker have plummeted more than 68% year to date.
Much of the decline in Tesla shares has come since CEO Elon Musk acquired social media platform Twitter. The stock is down more than 50% since the deal closed Oct. 27.
“We believe increasing negative sentiment on Twitter could linger long term, limiting its financial performance and become an ongoing overhang on TSLA,” Oppenheimer analyst Colin Rusch wrote in a note this month downgrading shares to perform from outperform.
Wall Street analysts expect 2023 to be another choppy year for automotive stocks. Here’s how legacy automakers, as well as top emerging EV startups, have performed this year.
- Ferrari (RACE): -18%
- Stellantis (STLA): -25%
- Toyota (TM): -26%
- Nissan (NSANY): -35%
- General Motors (GM): -43%
- VW (VWAGY): -46%
- Ford (F): -46%
- Fisker (FSR): -57%
- Tesla (TSLA): -68%
- Nio (NIO): -68%
- Lordstown (RIDE): -69%
- Nikola (NKLA): -75%
- Rivian (RIVN): -82%
- Lucid (LCID): -83%
- Canoo (GOEV): -86%
– CNBC’s Michael Bloom contributed to this report.
Lucid to cut 1,300 workers amid signs of flagging demand for its EVs
Lucid Motors CEO Peter Rawlinson poses at the Nasdaq MarketSite as Lucid Motors (Nasdaq: LCID) begins trading on the Nasdaq stock exchange after completing its business combination with Churchill Capital Corp IV in New York City, New York, July 26, 2021.
Andrew Kelly | Reuters
Struggling EV maker Lucid said in a regulatory filing on Tuesday that it plans to cut about 18% of its workforce, or roughly 1,300 employees, as part of a larger restructuring to reduce costs as it works to ramp up production of its Air luxury sedan.
Lucid said it will incur one-time charges totaling between $24 million and $30 million related to the job cuts, with most of that amount being recognized in the first quarter of 2023.
News of the job cuts was first reported by Insider earlier on Tuesday. Lucid’s shares closed down over 7% on Tuesday following the Insider report.
In a letter to employees, CEO Peter Rawlinson said the job cuts will hit “nearly every organization and level, including executives,” and that affected employees will be notified over the next three days. Severance packages will include continued healthcare coverage paid by Lucid, as well as an acceleration of equity vesting, Rawlinson wrote.
Lucid ended 2022 with about $4.4 billion in cash on hand, enough to last until the first quarter of 2024, CFO Sherry House told CNBC last month ahead of the company’s fourth-quarter earnings report. But there have been signs that demand for the high-priced Air has fallen short of Lucid’s internal expectations, and the company may be struggling to convert early reservations to sold orders.
Lucid said that it had more than 28,000 reservations for the Air as of Feb. 21, its most recent update. But it also said that it plans to build just 10,000 to 14,000 vehicles in 2023, far fewer than the roughly 27,000 that Wall Street analysts had expected.
With Lucid’s factory currently set up to build about 34,000 vehicles per year, the company has warned of continuing losses.
“As we produce vehicles at low volumes on production lines designed for higher volumes, we have and we will continue to experience negative gross profit related to labor and overhead costs,” House said during Lucid’s earnings call on Feb. 22.
Lucid hasn’t yet announced a date for its first-quarter earnings report.
Virgin Orbit extends unpaid pause as Brown deal collapses, ‘dynamic’ talks continue
NEWQUAY, ENGLAND – JANUARY 09: A general view of Cosmic Girl, a Boeing 747-400 aircraft carrying the LauncherOne rocket under its left wing, as final preparations are made at Cornwall Airport Newquay on January 9, 2023 in Newquay, United Kingdom. Virgin Orbit launches its LauncherOne rocket from the spaceport in Cornwall, marking the first ever orbital launch from the UK. The mission has been named Start Me Up after the Rolling Stones hit. (Photo by Matthew Horwood/Getty Images)
Matthew Horwood | Getty Images News | Getty Images
Virgin Orbit is again extending its unpaid pause in operations to continue pursuing a lifeline investment, CEO Dan Hart told employees in a company-wide email.
Some of the company’s late-stage deal talks, including with private investor Matthew Brown, collapsed over the weekend, people familiar with the matter told CNBC.
Hart previously planned to update employees on the company’s operational status at an all-hands meeting at 4:30 p.m. ET on Monday afternoon, according to an email sent to employees Sunday night. At the last minute, that meeting was rescheduled “for no later than Thursday,” Hart said in the employee memo Monday.
“Our investment discussions have been very dynamic over the past few days, they are ongoing, and not yet at a stage where we can provide a fulsome update,” Hart wrote in the email to employees, which was viewed by CNBC.
Brown told CNBC’s “Worldwide Exchange” last week he was in final discussions to invest in the company. A person familiar with the terms told CNBC the investment would have amounted to $200 million and granted Brown a controlling stake. But discussions between Virgin Orbit and the Texas-based investor stalled and broke down late last week, a person familiar told CNBC. As of Saturday those discussions had ended, the person said.
Separately, another person said talks with a different potential buyer broke down on Sunday night.
The people asked to remain anonymous to discuss private negotiations. A representative for Virgin Orbit declined to comment.
Hart promised Virgin Orbit’s over 750 employees “daily” updates this week. Most of the staff remain on an unpaid furlough that Hart announced on Mar. 15. Last week, a “small” team of Virgin Orbit employees returned to work in what Hart described as the “first step” in an “incremental resumption of operations,” with the intention of preparing a rocket for the company’s next launch.
Virgin Orbit’s stock closed at 54 cents a share on Monday, having fallen below $1 a share after the company’s pause in operations.
Virgin Orbit developed a system that uses a modified 747 jet to send satellites into space by dropping a rocket from under the aircraft’s wing mid-flight. But the company’s last mission suffered a mid-flight failure, with an issue during the launch causing the rocket to not reach orbit and crash into the ocean.
The company has been looking for new funds for several months, with majority owner Sir Richard Branson unwilling to fund the company further.
Virgin Orbit was spun out of Branson’s Virgin Galactic in 2017 and counts the billionaire as its largest stakeholder, with 75% ownership. Mubadala, the Emirati sovereign wealth fund, holds the second-largest stake in Virgin Orbit, at 18%.
The company hired bankruptcy firms to draw up contingency plans in the event it is unable to find a buyer or investor. Branson has first priority over Virgin Orbit’s assets, as the company raised $60 million in debt from the investment arm of Virgin Group.
On the same day that Hart told employees that Virgin Orbit was pausing operations, its board of directors approved a “golden parachute” severance plan for top executives, in case they are terminated “following a change in control” of the company.
Historic UAW election picks reform leader who vows more aggressive approach to auto negotiations
Supporters wave signs during an address at the Time Warner Cable Arena in Charlotte, North Carolina, on September 5, 2012 on the second day of the Democratic National Convention (DNC).
Mladin Antonov | AFP | Getty Images
DETROIT – United Auto Workers members have ousted their president in the union’s first direct election, ushering in a new era for the prominent organized labor group ahead of negotiations later this year with the Detroit automakers.
The union’s new leader will be Shawn Fain, a member of the “UAW Members United” reform group and local leader for a Stellantis parts plant in Indiana. He came out ahead in a runoff election by hundreds of votes over incumbent Ray Curry, who was appointed president by union leaders in 2021.
Fain, in a statement Saturday, thanked UAW members who voted in the election. He also hailed the election results as a historic change in direction for the embattled union, which he says will take a “more aggressive approach” with its employers.
“This election was not just a race between two candidates, it was a referendum on the direction of the UAW. For too long, the UAW has been controlled by leadership with a top-down, company union philosophy who have been unwilling to confront management, and as a result, we’ve seen nothing but concessions, corruption, and plant closures,” Fain said.
Curry, who previously protested the narrow election results, said in a statement that Fain will be sworn in on Sunday and that Curry is “committed to ensuring that this transition is smooth and without disruptions.”
“I want to express my deep gratitude to all UAW staff, clerical support, leaders and most of all, our union’s active and retired members for the many years of support and solidarity. It has been the honor of my life to serve our great union,” Curry said.
More than 141,500 ballots were cast in the runoff election that also included two other board positions, a 33% increase from last year’s direct election in which neither of the presidential candidates received 50% or more of the votes.
The election was overseen by a federal monitor, who did not immediately confirm the results. The election results had been delayed several weeks due to a run-off election as well as the close final count.
Shawn Fain, candidate for UAW president, is in a run-off election with incumbent Ray Curry for the union’s highest-ranking position.
Jim West for UAW Members United
Fain’s election adds to the UAW’s largest upheaval in leadership in decades, as a majority of the union’ s International Executive Board will be made up of first-time directors who are not part of the “Administration Caucus” that has controlled the union for more than 70 years.
Fain and other members of his leadership slate ran on the promise of “No corruption. No concessions. No tiers.” The last being a reference to a tiered pay system implemented by the automakers during recent negotiations that members have asked to be removed.
The shuffle follows a yearslong federal investigation that uncovered systemic corruption involving bribery, embezzlement, and other crimes among the top ranks of the UAW.
Thirteen UAW officials were convicted as part of the probe, including two past presidents. As part of a settlement with the union in late 2020, a federal monitor was appointed to oversee the union and the organization held a direct election where each member has a vote, doing away with a weighted delegate process.
For investors, UAW negotiations with the Detroit automakers are typically a short-term headwind every four years that result in higher costs. But this year’s negotiations are anticipated to be among the most contentious and important in recent memory.
Fain has said the union will seek benefit gains for members, advocating for the return of a cost-of-living adjustment, or COLA, as well as raises and job security.
The change in the UAW comes against the backdrop of a broader organized labor movement across the country, a pro-union president and an industry in the transition to all-electric vehicles.
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