TSLA Price Cut Updates, F’s Contract Offer to UAW & More

Detroit 3 automakers — General Motors GM, Ford F and Stellantis STLA — face a strike threat if they don’t reach an agreement with the United Auto Workers (UAW) before the current four-year contract expires at midnight on Sep 14, 2023.

Per Shawn Fain — president of UAW — over the last two decades, workers have made numerous concessions, including giving up wage hikes, and defined benefit pensions and post-retirement health care benefits. The UAW is determined to negotiate better terms, conditions and benefits for its members this year. The union is demanding an end to the tiered wage system that pays new hires less than veterans. Other demands include wage hikes of 46%, the restoration of cost-of-living allowances and defined-benefit pension plans for new workers and a reduction in the workweek duration.

To that end, Ford presented a contract offer to the UAW last week after the union called Detroit Three automakers to come up with counter-proposals. However, that fell short of UAW’s expectations. Meanwhile, UAW has filed unfair labor charges against General Motors and Stellantis with the National Labor Relations Board. Fain said that these two companies have refused to work with the union to reach a fair contract. GM and STLA have called the claim made by Fain baseless.

In the era of smart mobility, General Motors is collaborating with Google to investigate the potential integration of artificial intelligence technologies throughout the automotive company’s operations.

Electric vehicle behemoth Tesla TSLA made news as it cut prices of the Model S and X by 15-19% in the United States, except for the recently introduced Standard Range model. Additionally, Tesla has officially revealed the revamped Model 3, featuring a sleeker design, enhanced controls and improved comfort.

Meanwhile, China-based electric vehicle (EV) maker NIO Inc. NIO came out with second-quarter 2023 results and reported weaker-than-expected sales and profit owing to low deliveries and dismal vehicle margins.

Last Week’s Top Stories

General Motors and Google Cloud forged a deep collaboration to integrate conversational AI technology into millions of GM vehicles. GM’s OnStar Interactive Virtual Assistant, launched in 2022, employs Google Cloud’s AI algorithms, offering drivers responses to common queries, navigation support and routing assistance. The partnership’s success in implementing Google Cloud’s AI within GM’s OnStar service has paved the way for forthcoming generative AI deployments.

In 2019, General Motors introduced its first vehicles with integrated Google technology. The integration has expanded since then, granting users easy access to Google Assistant, Google Maps and Google Play from their vehicle displays. This partnership also led to the integration of Google Cloud’s Dialogflow conversational AI technology. Presently, GM’s OnStar virtual assistant handles over a million monthly customer queries in the United States and Canada, accessible in most GM vehicles from model year 2015 and newer, and connected through OnStar.

NIO incurred a loss per American Depositary Share of 51 cents in the second quarter of 2023, wider than the Zacks Consensus Estimate of a loss of 36 cents. The reported loss was also wider than the year-ago loss of 25 cents due to lower vehicle margins and higher operating expenses. Revenues of $1.2 billion lagged the Zacks Consensus Estimate of $1.35 billion and declined 14.8% year over year due to lower delivery volume.Gross profit came in at $12 million, tumbling 93.5% year over year. Vehicle margin in the reported quarter fell to 6.2% from 16.7% in second-quarter 2022. Gross margin was 1%, down from 13% in the year-ago quarter.

NIO delivered 23,520 vehicles in the second quarter, down 6.1% year over year. As of Jun 30, 2023, cash and cash equivalents totaled $1,892.6 million, and long-term debt was $902.5 million. For third-quarter 2023, NIO projects deliveries in the range of 55,000-57,000 vehicles, suggesting 74-80.3% surge year over year. Revenues are envisioned to be between $2,606 million and $2,692 million, indicating year-over-year improvement of 45.3-50.1%.

Ford’s contract offer to the UAW included 15% guaranteed combined wage increases and lump sums and enhanced benefits over the life of the contract. For UAW-represented hourly workers, Ford decided to increase wages and lump-sum bonuses to $92,000 in the first year of the contract, up from $78,000 in 2022. Apart from an increase in wages and bonuses, workers would also receive health care coverage and other benefits worth $17,500 and $20,500, respectively. In the first year alone, full-time permanent employees at the top wage rate could make up to $98,000 from wages, bonuses, profit sharing and overtime.Ford discarded wage tiers from the contract offer to help all employees achieve industry-leading wages.

However, the offer did not go down well with Shawn Fain, the president of UAW. During a live presentation on Aug 31, 2023, Fain discarded Ford’s proposal, deeming it both inadequate and offensive. He said that the union will accept nothing short of consistent wages that will rise in tandem with the economy. Per Ford’s press release, the automaker will not make a deal that limits its ability to invest, grow and share profits with its employees.

Tesla slashed prices for the Model S and X, making them more affordable. The Model S Long Range now starts at $74,990, a 15% drop from $88,490, offering an impressive 405-mile EPA range. The Model S Plaid, Tesla’s fastest car, starts at $89,990, down 17% from $108,490. The Model X Long Range starts at $79,990, an 18.8% decrease from $98,490, potentially making it eligible for federal tax credits. The Model X Plaid, starting at $89,990 (17% off its previous price of $108,490), remains a great value pick with its remarkable 0-60 mph time of 2.5 seconds. These price cuts make Tesla’s premium electric sedans and SUVs more attractive and competitive without compromising on performance or range.

Tesla has unveiled an upgraded Model 3 with notable changes in efficiency, safety, performance, utility and style. It boasts a sleeker design, an 8″ rear touchscreen for climate and entertainment control, and a revamped steering wheel with haptic switches and physical buttons, catering to those who prefer tactile controls. Suspension and cornering have been improved, along with enhanced sound-dampening materials, including 360° acoustic glass technology.

The Model 3 Project Highland offers two variants. The Rear Wheel Drive version with an estimated 513 km (319 miles) per charge marks a 24 km increase over the current model, starting at $61,900. The dual-motor AWD Long Range variant now starts at $71,900, marking a $1,500 increase, providing 629 km (391 miles) of WLTP range.

Tesla currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price Performance

The following table shows the price movement of some of the major auto players over the last week and six-month period.

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Zacks Investment Research

Image Source: Zacks Investment Research

What’s Next in the Auto Space?

Industry watchers will track China vehicle sales data for August 2023, which is likely to be released by the China Association of Automobile Manufacturers. Also, stay tuned for any updates on the UAW-Detroit 3 contract talks.

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