In this article, we discuss the 10 auto companies facing the worst declines amid global chip shortage.
The ongoing semiconductor chip shortage has had a huge impact on the global automobiles industry that uses these chips in the production of vehicles, both traditional and electric. A hit in production and sales due to the chip shortage will likely cost the auto industry $110 billion this year, according to a report by consulting firm AlixPartners. The forecast, up from $60 billion in losses predicted in January this year, was revised after a fire at a major chipmaker in Japan and increased supply chain problems related to semiconductors.
AlixPartners predicts that the global auto sector will produce 3.9 million fewer vehicles this year as a result of the chip crisis. However, IHS Markit, a London-based business intelligence firm, expects that number to be as high as 7 million. US President Joe Biden, who has championed a new plan to jumpstart American manufacturing during his tenure, has earmarked more than $50 billion for US-based chipmakers. He has also ordered a review of US supply chains in order to assess the problems faced by American carmakers in this regard.
Some of the top auto firms facing the worst declines amid the global chip shortage include General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), and Ford Motor Company (NYSE:F), among others discussed in detail below. The chip crisis began during the pandemic when the lockdown protocols led to the closure of some chip manufacturing plants. As the economy reopened at the turn of the year, the increase in demand for chips exacerbated the crisis, pushing prices sky high and affecting supply chains.
The increase in prices of semiconductors has also affected other sectors of the economy, including the finance world. The tech-enabled disruption of the auto industry, which had been proceeding at electric speed, has been hit. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Copyright: microolga / 123RF Stock Photo
Our Methodology
With this context in mind, here is our list of the 10 auto companies facing the worst declines amid global chip shortage. Only those auto companies that have announced either layoffs or sales, delivery, and production cuts because of the chip shortage were selected. The firms that forecast earnings declines because of the shortage were also included.
The list is compiled according to the number of hedge fund holders in each company. Data from the 873 funds tracked by Insider Monkey was used for this purpose.
Special importance was assigned to the basic business fundamentals and analyst ratings for each firm to provide readers with some context so they can make more informed investment choices.
Auto Companies Facing Worst Declines Amid Global Chip Shortage
10. Subaru Corporation (OTC:FUJHY)
Number of Hedge Fund Holders: N/A
Subaru Corporation (OTC:FUJHY) is placed tenth on our list of 10 auto companies facing the worst declines amid global chip shortage. The company makes and sells automobiles and is headquartered in Japan. In January this year, the company said it would cut output by several thousand in the US and Japan due to the chip shortage. The shortage affected the production of cars at the Gunma factory of the firm. Production at the factory was also halted for two days due to the chip crisis, a spokesperson of the firm told news agency Reuters that month.
Subaru Corporation (OTC:FUJHY) has a market cap of $14 billion. It posted a profit of ¥765 million in the previous fiscal year. The revenue over the period was ¥28 billion, down more than 15% year-on-year.
Just like General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), and Ford Motor Company (NYSE:F), Subaru Corporation (OTC:FUJHY) is one of the stocks taking a hit because of the global chip shortage.
9. Mazda Motor Corporation (OTC:MZDAY)
Number of Hedge Fund Holders: N/A
Mazda Motor Corporation (OTC:MZDAY) is ranked ninth on our list of 10 auto companies facing the worst declines amid global chip shortage. The company engages in the manufacture and sale of passenger cars. It is headquartered in Japan. In May, the automaker announced that the chip shortage was expected to affect 100,000 Mazda cars this year. In a statement, the company said it would try to minimize the impact of the crisis to around 70,000 vehicles. The company plans to fully leverage available inventory for the purpose.
Mazda Motor Corporation (OTC:MZDAY) has a market cap of over $5 billion. The company was founded in 1920 and employs close to 50,000 people. Some of the products it sells include four-wheeled vehicles, gasoline and diesel engines, as well as transmissions.
Along with General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), and Ford Motor Company (NYSE:F), Mazda Motor Corporation (OTC:MZDAY) is one of the firms affected by the global chip shortage.
8. Canoo Inc. (NASDAQ:GOEV)
Number of Hedge Fund Holders: 16
Canoo Inc. (NASDAQ:GOEV) is a California-based company that makes and sells consumer and commercial electric vehicles. It is placed eighth on our list of 10 auto companies facing the worst declines amid global chip shortage. At the end of July, the chief technology officer of Canoo, Peter Savagian, told news publication Business Insider that the company had the chip shortage on the radar and was actively positioning itself to avoid the possible impact it would have on the production of EVs.
On September 7, investment advisory HC Wainwright initiated coverage of Canoo Inc. (NASDAQ:GOEV) stock with a Buy rating and a price target of $15, noting the firm was well positioned to take advantage of the growing electric vehicle market.
At the end of the second quarter of 2021, 16 hedge funds in the database of Insider Monkey held stakes worth $37 million in Canoo Inc. (NASDAQ:GOEV), the same as in the previous quarter worth $14 million.
In addition to General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), and Ford Motor Company (NYSE:F), Canoo Inc. (NASDAQ:GOEV) is one of the companies facing a production decline amid a global chip shortage.
7. Fisker Inc. (NYSE:FSR)
Number of Hedge Fund Holders: 16
Fisker Inc. (NYSE:FSR) is a California-based firm that designs, manufactures, and markets electric vehicles. It is ranked seventh on our list of 10 auto companies facing the worst declines amid global chip shortage. The stock has plunged in value by 29% over the past three months as the chip shortage hits the industry. Fisker recently priced an upsized $625M green convertible notes offering. The company has also inked an agreement with Magna International as it plans the production of new models.
On August 9, investment advisory Morgan Stanley resumed coverage of Fisker Inc. (NYSE:FSR) stock with an Overweight rating and a price target of $40, terming the firm the “highest rated de-SPAC” startup in the EV space.
At the end of the second quarter of 2021, 16 hedge funds in the database of Insider Monkey held stakes worth $256 million in Fisker Inc. (NYSE:FSR), down from 22 the preceding quarter worth $337 million.
General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), and Ford Motor Company (NYSE:F) are some of the automakers affected by a chip shortage worldwide, along with Fisker Inc. (NYSE:FSR).
6. Li Auto Inc. (NASDAQ:LI)
Number of Hedge Fund Holders: 20
Li Auto Inc. (NASDAQ:LI) is placed sixth on our list of 10 auto companies facing the worst declines amid global chip shortage. The firm makes and sells smart sports utility vehicles and is headquartered in China. The stock has plunged in value by over 7% since the beginning of this week after the firm announced that it would be cutting down guidance for the third quarter deliveries to 24,500 from around 26,000 due to the chip shortage crisis. This correction means the company expects to deliver 6,500 vehicles in September, down 30% month-on-month.
On August 31, investment advisory Bank of America maintained a Buy rating on Li Auto Inc. (NASDAQ:LI) stock and raised the price target to $42 from $39, appreciating the second quarter earnings results of the company and the third quarter guidance.
At the end of the second quarter of 2021, 20 hedge funds in the database of Insider Monkey held stakes worth $457 million in Li Auto Inc. (NASDAQ:LI), up from 18 in the previous quarter worth $493 million.
General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), and Ford Motor Company (NYSE:F) have all reported production hiccups because of a chip shortage, just like Li Auto Inc. (NASDAQ:LI).
5. Stellantis N.V. (NYSE:STLA)
Number of Hedge Fund Holders: 28
Stellantis N.V. (NYSE:STLA) is ranked fifth on our list of 10 auto companies facing the worst declines amid global chip shortage. The company makes and sells different types of automobiles and is headquartered in the Netherlands. The evidence of the firm being affected by the chip shortage is evident from the fact that it has modified the default specifications of the Ram 1500 pickup it makes. The truck, which came with a digital rear-view mirror that used an electronic chip, is now an optional upgrade.
On September 4, investment advisory DA Davidson kept a Buy rating on Stellantis N.V. (NYSE:STLA) stock with a price target of $50. Peter Heckmann, an analyst at the advisory, issued the ratings update.
At the end of the second quarter of 2021, 28 hedge funds in the database of Insider Monkey held stakes worth $844 million in Stellantis N.V. (NYSE:STLA), up from 21 in the previous quarter worth $751 million.
4. NIO Inc. (NYSE:NIO)
Number of Hedge Fund Holders: 34
NIO Inc. (NYSE:NIO) is a China-based company that engages in the development and marketing of electric vehicles. It is placed fourth on our list of 10 auto companies facing the worst declines amid global chip shortage. In early September, the company posted delivery numbers for the month of August, reporting deliveries of 5,880 vehicles in August, down from 7,931 cars in July. The firm blamed “uncertainty and volatility of semiconductor supply” as the main reason behind the drop.
On August 12, investment advisory Bank of America maintained a Buy rating on NIO Inc. (NYSE:NIO) stock with a price target of $62, raising the 2022 volume forecasts for the firm and appreciated the “solid” third quarter guidance of the firm.
At the end of the second quarter of 2021, 34 hedge funds in the database of Insider Monkey held stakes worth $2 billion in NIO Inc. (NYSE:NIO), up from 28 in the preceding quarter worth $1.3 billion.
In its Q2 2020 investor letter, McLain Capital, an asset management firm, highlighted a few stocks and NIO Inc. (NYSE:NIO) was one of them. Here is what the fund said:
“Nio, Inc. (NIO): It’s stock up 360% since the beginning of June on no news, and one of our more troublesome short positions, the Chinese electric vehicle manufacturer is valued at a whopping $17bln on trailing revenue of only $1.1bln. In 2019, the business ran a -17% gross margin, a -140% EBITDA margin & burned ~$1.5bln in cash in 2019. The stock has become one of the most popular stocks among retail traders with approximately 250,000 accounts holding the name just on the popular Robinhood trading platform.”
3. Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 55
Ford Motor Company (NYSE:F) is a Michigan-based company that makes and sells a range of automobiles, including cars and trucks. It is ranked third on our list of 10 auto companies facing the worst declines amid global chip shortage. In April, at the height of the chip shortage crisis, the president of the company, Jim Farley, said that the full recovery of the auto chip supply would stretch into the fourth quarter of this financial year, and possibly even into 2022. He added that making industry volume recovery in the second half of this year was challenging.
On July 16, investment advisory Bank of America maintained a Buy rating on Ford Motor Company (NYSE:F) stock and raised the price target to $18 from $17. John Murphy, an analyst at the advisory, issued the ratings update.
At the end of the second quarter of 2021, 55 hedge funds in the database of Insider Monkey held stakes worth $2.10 billion in Ford Motor Company (NYSE:F), up from 49 in the preceding quarter worth $2.19 billion.
In its Q1 2020 investor letter, Greenlight Capital Fund, an asset management firm, highlighted a few stocks and Ford Motor Company (NYSE:F) was one of them. Here is what the fund said:
“General Motors (GM) was a disappointment. The damage from last year’s strike consumed most of the cash flow GM would have otherwise generated in 2019. We had expected a strong bounce back in earnings and cash flow in 2020, but the annual guidance, while meeting Wall Street expectations, was worse than we expected. Further, the cash burned during the strike needed to be re-earned in order to protect GM’s investment grade rating. Pre-crisis, there would have been, at best, a minimal share repurchase late in the year. At the analyst day, our hopes that 2020 would finally be the year were dashed. We sold our stock. Over our five-year holding period, we made a 9.6% IRR on GM. In the difficult environment, its most comparable peer, Ford, lost about half its value.”
2. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 60
Tesla, Inc. (NASDAQ:TSLA) is placed second on our list of 10 auto companies facing the worst declines amid global chip shortage. The firm engages in the development and sale of electric vehicles and is headquartered in California. In the second quarter earnings call, Elon Musk, the chief of the firm, said that the company had halted production of electric vehicles at the factory in Shanghai due to the chip shortage. The firm has made tweaks to software and is looking to source chips from alternative suppliers to keep up the production and sales of EVs.
On September 17, investment advisory Wedbush reiterated an Outperform rating on Tesla, Inc. (NASDAQ:TSLA) stock with a price target of $1,000, noting that the demand story for the EVs manufactured by the company was just starting to play out.
At the end of the second quarter of 2021, 60 hedge funds in the database of Insider Monkey held stakes worth $9 billion in Tesla, Inc. (NASDAQ:TSLA), down from 62 in the previous quarter worth $10 billion.
Here is what Baron Partners Fund has to say about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2021 investor letter:
“Tesla, Inc. designs, manufactures, and sells fully electric vehicles, solar products, energy storage solutions, and battery cells. The stock fell during the quarter as a result of general market dynamics and a potential production slowdown due to parts shortages. A refreshed S/X and China Model Y ramp could also have a negative impact on margins in early 2021. We anticipate strong growth and improved margins driven by new production capacity, manufacturing efficiencies, localization of its manufacturing and supply chain, and maturation of Tesla’s full self-driving technology.”
1. General Motors Company (NYSE:GM)
Number of Hedge Fund Holders: 86
General Motors Company (NYSE:GM) is ranked first on our list of 10 auto companies facing the worst declines amid global chip shortage. The firm designs, builds, and sells automobiles and is headquartered in Michigan. The sales of the firm for August this year declined by 33% year-on-year due to the chip shortage crisis, the firm revealed this month. Earlier in the year, the firm had said it expected earnings to be cut by $1.5 billion this year due to the chip crisis.
On August 5, investment advisory Deutsche Bank maintained a Buy rating on General Motors Company (NYSE:GM) stock with a price target of $68, identifying the firm as a “short-term investment idea” in a letter to investors.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Harris Associates is a leading shareholder in General Motors Company (NYSE:GM) with 34 million shares worth more than $2 billion.
Junto Investments, in its Q4 2020 investor letter, mentioned General Motors Company (NYSE:GM). Here is what the fund has to say about General Motors Company in its letter:
“General Motors was the biggest gainer. We managed to buy it at a screamingly cheap price in the middle of March. A lot of interesting news has emerged about GM recently, including the new electric product delivery system BrightDrop and GM Cruise’s team-up with Microsoft Azure to commercialize self-driving cars in 2021. GM’s intrinsic value is crystallizing and the company is worth a whole lot more than is still reflected in the market.”
You can also take a peek at 12 Best Big Tech Stocks to Buy Right Now and 10 Stocks That Just Received Sell Rating from Analysts.
Follow Insider Monkey on Twitter
Suggested Articles:
- 10 Best Bank and Finance Stocks to Buy According to Mario Gabelli
- 10 Best Diversified Stocks to Invest In
- 10 Best SPACs to Invest In According to Reddit
Disclosure. None. 10 Auto Companies Facing Worst Declines Amid Global Chip Shortage is originally published on Insider Monkey.
