Wall Street Breakfast: Auto Sales Crown

Jan. 30, 2023 7:15 AM ET43 Comments
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Auto sales crown

Toyota (NYSE:TM) is not only defending its title as the world's top-selling automaker for a third year in a row, but it is doing so by a wide margin. Including subsidiaries Hino Motors and Daihatsu, group sales reached 10.5M vehicles in 2022, compared to the 8.3M of its second-ranked rival Volkswagen (OTCPK:VWAGY). The news comes after Toyota shocked the industry with its first CEO transition in 14 years that could indicate a stronger focus on next-generation vehicles.

Bigger picture: Despite production constraints caused by COVID-19 and increased demand for semiconductors, Toyota's total sales were in line with its figure from 2021 versus a 7% annual drop seen at VW. Pressures from poorly stocked dealerships and dwindling savings have been seen across the globe, as well as the U.S., which just marked its worst showing for car sales in over a decade. Financing new vehicles is also growing more expensive than ever, with 15.7% of American car buyers having a record-high monthly payment of more than $1,000.

In 2021, Toyota even surpassed General Motors (NYSE:GM) as the best-selling automaker in the U.S. (see how here), though it doesn't remain its long-term goal as the company sets its sights on the transformation of the auto industry. Toyota has been diversifying its portfolio into a broad range of vehicle classes, including ICE, EV, hybrid and hydrogen fuel cells, a strategy that it has continued to pursue for decades (the first Prius was released in 1997). While Toyota has recently doubled down on its all battery-electric vehicles, SA author Doron Levin says it is not moving fast enough when factoring in its global footprint, though he does like the company's dividend, which is paying a yield of nearly 3%.

Fully electric or plug-in hybrid? As the BEV or PHEV debate rages on the world stage, many are sizing up how things will play out, especially given governmental intervention (see green energy subsidies and tax breaks) and the starting lines of various automakers. SA contributor Ramy Taraboulsi flags some interesting winners in the race, even if their strategies and business models are flawed. See how he stacks up the visions of Toyota versus Tesla (NASDAQ:TSLA), as well as their core competencies and financial projections. (365 comments)

Survey Monday

The major U.S. stock averages are pointing to a lower open this morning, kicking off a week packed with macro events and major tech earnings. At the time of writing, Nasdaq 100 (NDX:IND) and S&P 500 futures (SPX) are off 1.4% and 1%, respectively, while contracts linked to the Dow (INDU) are 0.7% lower. The biggest item on the calendar will likely be the FOMC's policy meeting on Tuesday and Wednesday, and while the Fed looks certain to hike rates by a slower 25 bps pace, what's not so clear is what comes next. Any thoughts?

· No more hikes, they're done
· One more quarter-point bump
· Rates will hit 5% or more

Take the survey and see the results here

Prices at the pump

U.S. gasoline prices have surged 12% over the past month to average $3.51 per gallon, threatening the Fed's inflation fight and potentially extending last year's big rally in refinery equities. Although winter storms in December contributed to tighter supply, January's mild weather may have led to more drivers that are pushing up pump prices. Gasoline exports have also doubled from a year ago as China's reopening means there are more people using fuel, while diesel is rising again toward 2022's highs as Europe bans Russian oil products starting Feb. 5. Valero (VLO) was the first of the major refiners reporting Q4 earnings last week, easily beating Wall Street estimates and wrapping up its best year on record. Seeking Alpha Quant Ratings are also heavily bullish on industry players like PBF Energy (PBF) and Marathon Petroleum (MPC). (42 comments)

China's response to ChatGPT

Chinese search giant Baidu (BIDU) is reportedly planning to roll out an artificial intelligence chatbot service similar to OpenAI's ChatGPT in March, which would launch as a standalone application and gradually merge with its search engine (will Microsoft do the same?). To note, chatbots in China currently focus on social interaction, though ChatGPT performs better at more professional tasks, such as programming and essay writing. Apart from research in AI, Baidu is developing autonomous driving technology. Last month, the company was also dropped from the Nasdaq 100 amid several changes to the closely watched index.

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