The China dilemma: US automakers outmanoeuvred by global peers
Consumer Discretionary
Media outlets have been highlighting the China-based R&D efforts of multinational auto brands like Volkswagen, Renault and Hyundai. Notably, autonomous driving, smart cabin technology and lithium battery development are key areas where these brands seek lasting partnerships - sometimes to better localise their China-specific models but increasingly to gain a competitive edge in global markets as well. This poses a thorny question for US automakers pursuing decoupling: on one hand, imitating such strategies is politically unpalatable back home; on the other, an import ban on Chinese cars does not provide full protection, as European and Asian brands are also out-innovating them, often by leveraging their China-based R&D operations. The challenge to US carmakers' global sales may prove greater than some had anticipated.
Edition: 207
- 21 March, 2025
Short Attacks: Carvana (CVNA) & FTAI Aviation (FTAI)
Forensic Alpha’s analysis finds an overlap of several issues highlighted in Hindenburg Research’s meaty report on CVNA “A Father-Son Accounting Grift for the Ages” - in particular related-party transactions with DriveTime and off-balance sheet risk. Commenting on Muddy Waters' new short report on FTAI, they note that using transfers to inflate profits within a “prize division” is a common shenanigan - Forensic Alpha recently raised similar concerns around CRH and Volkswagen. Their own analysis of FTAI classifies the stock as “High Risk”.
Edition: 203
- 24 January, 2025
Volkswagen (VOW GR) Germany
Consumer Discretionary
While operationally the company is encumbered with a number of issues, the balance sheet is still seen as reasonably robust and a source of strength. Nevertheless, there are some signs of increasing concern. A key issue for VW is that the balance sheet of the finance division may need to continue expanding to absorb excess production. Unless capacity can be cut rapidly, this means the group may be running through cash faster than implied by the cash flow of the automotive segment alone. While VW needs to reduce costs urgently, in practice this is likely to be drawn out over several quarters. In the meantime, concerns around cash flow and the balance sheet are likely to intensify.
Edition: 199
- 15 November, 2024
Consumer Discretionary
Amid the world’s transition to clean energy vehicles, BYD’s middle-of-the-road positioning, strong engineering background in both ICE and battery technology, and long brand track record will allow it to assume the role of Volkswagen or Toyota in the EV era. The US-led protectionism and the rise of Huawei-affiliated EV brands will uniquely help BYD to compete at home with the best and transfer the learnings outwards as a trusted bridge to the world. Both BYD and BYD Electronic International trade near their historical lows in terms of PE band. Blue Lotus initiates coverage with a Buy rating and a TP of HK$350 (65% upside).
Edition: 177
- 12 January, 2024
Renault (RNO FP) France
Consumer Discretionary
Woozle upgrades the stock to Buy following their latest interviews with dealers across Europe and the US - RNO prices are +6% Y/Y in 1Q23 following the launch of several higher margin midsized and compact vehicles in 2022. Volumes are +13% Y/Y (vs. consensus of -8%) driven by a 27% increase in sales in Europe, where RNO has gained market share and its Dacia Spring is now the second most sold EV in Europe, behind Tesla. Elevated raw material / energy prices, rising wage pressure and logistical problems are the main risks to look out for 2023. A lack of truck drivers in Europe was also flagged, but this has mostly impacted Volkswagen and Stellantis.
Edition: 158
- 14 April, 2023
Consumer Discretionary
PAH3 / POAHY is the best way to own Volkswagen according to Jay Van Sciver - Porsche SE principally owns VW common shares. VW trades at a discount to a SOTP valuation, with just the Porsche franchise likely worth more than the entire VW current Mkt/Cap. Then, Porsche SE trades at roughly 30% discount to the market value of those VW common shares. A Porsche IPO should make all this obvious and begin to unlock the value. Being on the same terms as the Porsche family is the most reasonable path to taking advantage of this disconnect as they go through the IPO. Porsche SE is the only long auto OEM Hedgeye currently has on their Best Ideas list.
Edition: 144
- 16 September, 2022
Asia’s Covid Woes & Global Supply Chain Implications
Autos / Industrials
More Asian countries are currently under some form of lockdown than at any point in the past year. This includes Taiwan, Thailand and Vietnam - all key source countries for global supply chains. SRR’s contacts in the Automotive and Automation industries now expect supply chain bottlenecks to persist for the remainder of the year with Logistics contacts expecting air and ocean freight to remain tight through to June 2022! SRR’s top picks for China exposure in H2 include Otis, ABB, Schneider Electric, Siemens, Yaskawa, Fanuc, Aptiv, Nio and Volkswagen.
Edition: 116
- 06 August, 2021
Tesla (TSLA)
Consumer Discretionary
TSLA China analysis: SRR’s latest checks suggest recent controversies are taking a toll with NIO, XPeng and Volkswagen the main beneficiaries. Feedback from dealers was consistent - there has been a clear increase in cancellations and a decline in foot traffic. Prospective buyers are adopting a ‘wait and see’ approach which increases the risk for a downside surprise in registrations over the coming months. Combined with a significant narrowing of lead times for the Model 3 (1-3 weeks from 2-7) and Model Y (1-3 weeks from 3-9) leaves SRR very bearish on near-term prospects.
Edition: 111
- 28 May, 2021
China Autos: Bullish NEVs
Consumer Discretionary
NEV market share continues to rise - SRR expect NEV sales to remain strong in 2021 (+40-60%), with the NEV penetration rate increasing by +150-250 bps, placing China ahead of its path to “20% by 2025”. Highlights Volkswagen as the next China EV play; well placed to gain market share due to its attractive pricing (avg. ~230K RMB) and impressive new launches. Among the domestic brands they prefer Nio and Xpeng over Li Auto.
Edition: 108
- 16 April, 2021