Here’s a wild fact to start your day: Tesla is now just the third biggest electric automaker in Europe by sales. Volkswagen Group is first, with more than 20% of the market. Stellantis is actually second. Stellantis! What’s extra wild about this is that Stellantis, so far as I can tell, doesn’t sell a single pure electric car in the United States.
Is there some fun-with-numbers going on here? Sure. The number of different brands and vehicles that VW and Stellantis have to sell to even catch up with a single Tesla model is hilarious but, given the existence of shared platforms, it’s not quite as big of a deal as that sounds.
For all the rah-rah about Toyota lately, it’s sitting on a truly weird recall for about 1.85 million RAV4s. Ford and GM haven’t gotten the rah-rah treatment in a while, but one analyst thinks the companies are maybe good buys. Finally, we’ll talk about the Fed because I like talking about the Fed and it’s important if you wanna buy a car.
Stellantis, Europe And The Jeep Avenger
Let’s not get it twisted. Tesla still sells a lot of cars in Europe. In August of 2023, the Tesla Model Y and the Tesla Model 3 were the #1 and #2 best-selling EVs across all of Europe.
A reason why Tesla is so profitable is that, other than a handful of S/Xes, that’s basically all the company sells in Europe (or anywhere else). The Volkswagen Group is the biggest overall seller of EVs in that part of the world because it has the ID.4, and the Enyaq, and the ID.3, and the Cupra Born, and the Q4 e-tron. If you were curious, all of those cars I just named are built on the same VW MEB platform.
Stellantis, amazingly, is second. How? Similar to VW’s model, Stellantis has a ton of brands and many of them have market-specific loyalty. There’s the Opel Mokka, Citroen C4, and Peugeot 208. There’s also the Fiat 500e, which is the eighth most popular EV in Europe.
And now, there’s the Jeep Avenger. We previously wrote about the car, pointing out that it’s similar in a way to an electrified Renegade, though it’s actually about six inches shorter. In EV form, the front-wheel-drive EV has a WLTP range of 250 miles (340 miles in purely urban driving) and starts at about $42,000 (before local credits) depending on where you buy it.
The little EV just went on sale in Europe and has already earned the European Car of the Year award as well as, more importantly, about 40,000 pre-orders according to Stellantis.
Via The Detroit Free Press, here’s the CFO of Stellantis explaining why that’s a big deal that Stellantis grabbed about 16% of Europe’s EV market share in Q3:
“The next threshold for us as a company is: How do we get to 20%? Give us a little bit of time and energy to do that,” Knight said. “But, as a group, that’s something we’re very focused on. I think that position for us as being No. 2 in the market and overtaking Tesla was sort of an important psychological hurdle for us as a business.”
It’s not not a big deal, and strong early sales from the Avenger are a good sign. Can Stellantis build a vehicle that’s capable of breaking into the top 5 in Europe? That’ll be a better sign for the company and the Avenger could be that car.
As for why we’re not getting it, the Polish-built EV was developed with Chinese automaker Dongfeng and currently only comes in 2WD. It also wouldn’t qualify for a tax credit. The idea of Americans getting excited about a Chinese-designed, Polish-built EV that’s as expensive as a Tesla (after credits) and doesn’t spin all four wheels is hard to swallow.
Toyota’s Weird RAV4 Recall
I feel like this is a first. At least, I can’t remember a similar recall recently. Toyota is recalling almost 2 million 2013-2018 RAV4 SUVs in the US because of a fire risk that comes from replacement 12-volt batteries.
The recall covers 2013-2018 model year vehicles. Toyota said some replacement 12-volt batteries have smaller top dimensions and if a hold-down clamp was not tightened correctly, the battery could move when the vehicle is driven with forceful turns potentially short circuiting, increasing the risk of fires.
So the replacement batteries used, presumably installed by dealers, weren’t being tightened all the way? This is a weird one.
Are Ford And GM Oversold?
Ford and GM have not exactly been stellar investments lately, as both are down double-digit percentages in a year where the S&P 500 is up about 10%. So, why would anyone suggest buying either stock?
Barclays analyst Dan Levy has upgraded both from a hold to a buy as both are “historically cheap” and trading at revenue multiples that are low even for them.
From the Bloomberg story on his recommendations:
“Valuation hasn’t typically been a case to own Ford/GM — investors argue they are cheap for a reason,” Levy wrote in a note to clients on Wednesday. “Yet we believe given historically depressed multiples, attractive upside exists.”
GM shares are trading at four times its 2024 estimated earnings, which is the stock’s lowest multiple since reentering the public markets 13 years ago, according to Levy. Similarly, Ford is currently trading at about 5.5 times, below its historical level, he added.
Imagine how much Ford would be worth if they built a Maverick that had a rear-mounted electric motor? That’s all I’m saying.
The Fed’s Actions Still Aren’t Great For Borrowers
A global pandemic and a response that has no historic parallel resulted in governments like the United States spending a lot of money. Inflation happened (for complicated reasons) and the Federal Reserve Bank, aka the Fed, reacted by raising rates and trying to slow things down a bit.
In theory, the Fed deciding not to raise rates again after their last meeting should be a good sign for people worried about rising interest rates (i.e. anyone hoping to finance a car or sell a car that’s going to be financed). Car rates are too high, with new auto loan rates hitting nearly 10% in October.
But the Fed does more than just set rates and Cox Automotive’s Chief Economist Jonathan Smoke explained yesterday why you shouldn’t expect rates to go down any time soon:
A major contributor to the increase in bond yields in recent months has been the liquidation of the Fed’s balance sheet, otherwise known as Quantitative Tightening (QT). The Fed has sold off $224 billion in Treasuries and Mortgage-Backed Securities since their July 26 meeting. Their balance sheet peaked last June and has shrunk by more than $1 trillion so far.
The last time the Fed tried to shrink the balance sheet in 2018-2019, they stopped well before selling off $1 trillion.
This time, QT is happening as the U.S. Treasury is flooding the bond market to fund the U.S. government’s deficit spending. When bond supply exceeds demand, bond prices fall, and yields rise. Hence, the Fed can leave policy words unchanged. Still, their actions are deliberately contributing to higher long-term rates, which matter more to consumers and businesses than what the Fed charges banks to borrow.
Yup. Cash deals or short-term leases (36 months or less) are starting to look increasingly attractive.
The Big Question
Could Jeep sell the Avenger EV here? Would Americans buy a FWD Jeep?