Automakers at the crossroads

|By:, SA News Editor

Citi asks two great questions this morning about "peak auto" after watching Detroit automakers slump yesterday on a softish report on April U.S. sales.

Citi snippet: "If auto industry conditions are eroding, why did GM & Ford just last week confirm 2017 guidance? And why do auto stocks seem to react with more volatility to monthly SAAR data than fresh earnings reports?"

It's Citi contention that the market is underestimating the "uniqueness" of the pickup segment where a majority of GM and Ford's profits are derived. The firm has an Overweight rating on both automakers.

The discussion from Citi circles back a bit to Tesla (NASDAQ:TSLA) and whether or not it's a binary decision on if Tesla winning EV mass market share is a profit killer for pickup-heavy GM and Ford. Other automakers such as Volkswagen (OTCPK:VLKAY), Toyota (NYSE:TM) and Honda (NYSE:HMC) derive their profit across a broader mix of segments and geographic markets.

It's showtime for Tesla, with earnings due out after the bell today. The Model 3 production timeline, cash burn rate, supplier update and Q1 automotive gross margin rate are just a few of the expected highlights of the report. Investors will also be listening to see if CEO Elon Musk expounds on his TED talk last week on the topics of a "spry" electric semi-truck and gigafactory expansion.