#753 - 🚗 Japan Sees 3-Way Partnership

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Fantastic Friday, Friend!

Today, we are taking a look at Honda and Nissan’s new deal with Mitsubishi, checking-in on Carvana, Toyota, VW, and BMW’s Q2 data. Then, we’ve got a nice little economic recap for ya.

That’s what we are reading about. What are you reading about?

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BUSINESS

Honda, Nissan, and Mitsubishi Make it Official

Their Powers Combined!

Honda, Nissan, and Mitsubishi have officially announced a strategic partnership to advance electric vehicles and automotive software. The alliance initially formed between Honda and Nissan in March now includes Mitsubishi, marking a significant consolidation in Japan's auto industry.

Step Aside Webster: New Definitions are Here

The collaboration focuses on developing next-generation software-defined vehicles (SDVs) by 2028, improving autonomous driving technology, connectivity, and artificial intelligence. Key components like electric motors, inverters, and e-Axles will be jointly procured, and the companies aim to standardize EV batteries to be interchangeable across their brands. This move is expected to streamline production and reduce costs, enhancing their competitiveness against global rivals, particularly from China.

Batteries not Included

In North America, Nissan plans to source lithium-ion batteries from Honda's joint venture with LG Energy Solution starting in 2028. Additionally, Honda and Nissan will supply each other with vehicle models to complement their lineups, a strategy known as "mutual vehicle complementation."

Look Out World

This expanded alliance is crucial as the automotive industry faces rapid changes and increasing competition. With Mitsubishi joining, the combined sales of these automakers exceed 8 million vehicles annually, positioning them to better compete with the Toyota-led group, which includes Subaru, Mazda, and Suzuki, and collectively sells over 16M vehicles a year.

Innovate or Die

The partnership underscores a shared urgency to innovate and scale up, ensuring their survival and growth in the evolving automotive landscape. By pooling resources and expertise, Honda, Nissan, and Mitsubishi are gearing up to face the challenges of the future head-on.

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DATA & INSIGHT

Cents and Sensibilities

The economy surprised everyone last week with 2.8% GDP growth, surpassing expectations and showing overall strength in the market. Coupled with steady unemployment rates, experts predict with nearly 90% probability that the Fed will reduce interest rates at its next meeting in September by a quarter point to a range of 5%-5.25%.

We review how the rest of the economy, and retail auto in particular, is doing in this week’s Market Check.

👉 Uncover all the details in the full article here. 👀

BUSINESS CONT’D

News: Carvana, Toyota, VW, and BMW

Q2: Carvana on Track for Record Year

Carvana has exceeded Wall Street's expectations for the second quarter of 2024, setting the stage for a record-breaking year. Here's a detailed look at the numbers and key developments:

• Net Income: $48M with a net income margin of 1.4%.

• Earnings per Share (EPS): 14 cents, beating the expected loss of 7 cents.

• Revenue: $3.41B, surpassing the $3.24B expected.

• Retail Vehicle Sales: Over 101,400 units, up 32.5% from Q2 2023.

• Gross Profit per Unit (GPU): $7,049, an increase of $529 from the previous year.

• Adjusted EBITDA: $355M, with an adjusted EBITDA margin of 10.4%.

Future Projections and Offerings

• 2024 Forecast: Carvana projects adjusted EBITDA of $1B to $1.2B for the full year, significantly up from $339M in 2023.

• Stock Offering: An at-the-market offering worth approximately $1B in stock (around 35M shares).

CEO Insights

Carvana CEO Ernie Garcia emphasized the company's untapped potential and continuous improvement, projecting a strong second half for 2024 with increased retail vehicle sales.

Toyota's Q1 Performance: Profit Up, Shares Down

Toyota posted a 17% increase in first-quarter profit, reaching 1.3T yen ($8.70B) due to cost-cutting and a weaker yen. However, shares fell nearly 9% as the growth was the weakest in seven quarters. Despite challenges like certification scandals and inventory issues, Toyota maintained its forecast of 4.3T yen profit for the full year.

VW Q2 Dropped, but Optimistic

Volkswagen Group's second-quarter results show a 2.4% drop in operating profit as the company faces restructuring charges and reduced deliveries. Despite these challenges, VW is optimistic about achieving its targets through a series of upcoming model launches in the second half of the year.

• Financial Performance: Operating profit (EBIT) fell to €5.46B ($5.91B), with an operating margin decrease to 6.6% from last year's 7%. Core brand profitability (VW, Skoda, Seat) dropped to 5%, and second-quarter sales decreased by 3.8%.

• Strategic Moves: VW is focusing on cost reduction, including higher severance expenses and adjusting for potential closures, like the Audi plant in Brussels. The company is banking on new model launches and expects operating returns of 6.5% to 7% for 2024.

CFO Arno Antlitz stressed the importance of these measures, indicating that significant efforts are needed to achieve their goals in the competitive automotive landscape.

BMW's Margins Squeezed by China Competition

BMW reported a second-quarter EBIT margin of 8.4%, down from 9.2% last year, missing analyst expectations. The 4% sales slump in China contributed to the dip, although BMW performed better than some competitors. Despite the setbacks, BMW saw strong demand for electric vehicles, increasing EV sales by a quarter in the first half of 2024, underscoring their commitment to e-mobility.

AROUND THE ASOTU-VERSE

Quick Hits

• The U.S. is turning a Manhattan Project site into a solar farm. ☀️ 

• Taco Bell will be the next to try AI at the drive-thru. 🌮 

• Mortgage rates drop to the lowest level since Feb. 🏘️ 

History

• 2000: BMW officially announces a new MINI Cooper. 🚐 

• 1967 – 1970: Chevelle Clay Model documented (plus Chevelles for sale!). 💪 

• 1776: The signing of the United States Declaration of Independence takesk place. ✏️ 

Thanks for reading, friend! May the desires of your visitors and your inventory match.