Auto Retail Agenda: 22 November 2021
21 November 2021
- AUTO RETAIL STOCKS FALL ON MORGAN STANLEY BEAR
- COSTS RISK FROM ‘WORRYING’ LACK OF EV TECHNICIANS
- ASTON MARTIN RETAIL FOCUS BOOSTS PROFITABILITY
- BBC HIGHLIGHTS ONLINE CAR SALES ‘BOOM’
- US PRIVATE EQUITY FIRM TARGETS AUTO RETAILERS WITH $400m
- CHRYSLER EXITS AUSTRALIA
- STOCKWATCH
- COMING UP: SMMT Annual Dinner
- ONLINE RETAIL SALES FALL TO PRE-PANDEMIC LEVELS
- OFFICIAL RECEIVER FILES £1bn CLAIM AGAINST KPMG
Auto retail stocks fall on Morgan Stanley bear
Influential Morgan Stanley equity analyst Adam Jonas has released a research note expressing caution over auto retailers because direct-to-consumer sales from Tesla and other EV start-ups pose a threat “even bigger than the threat of electrification itself”.
Mr Jonas downgraded North America’s Penske and Sonic “as a reflection of secular industry headwinds despite peak earnings”.
The release of the bearish report hit stock prices on Wednesday with Penske falling 10.4%, Sonic down 8.6%, while Group 1 fell 11.5% and Auto Nation fell 9.7%.
The Morgan Stanley analyst said he was concerned about the pressure franchised retailers face as Tesla and other startup EV makers expand and grow direct-to-consumer vehicle sales.
The following day, a report from Truist Securities countered this view. It said the threat outlined by its competitor “is overblown with limited downside risk to earnings” – and the stock price fall represented a buying opportunity.
The direct-to-consumer model is not new, said Truist analyst Stephanie Moore, and it’s not mandatory for EVs to be sold in this way. Traditional automakers are already relying on dealers to sell their electric cars – and “EVs will also require education for buyers as well as parts and service provided by dealers”.
Costs risk from ‘worrying’ lack of EV technicians
Former Aston Martin CEO Andy Palmer says there is “already a worrying lack of capable technicians” to service electric cars. This could lead to retailers competing for highly-skilled talent which “may result in higher costs for the repair of electric vehicles, at least over the short-to-medium term”.
He is calling on schools, colleges and universities to “recognise the role the auto industry can play in providing highly-skilled, well-paid and green jobs for future generations”.
Aston Martin retail focus boosts profitability
Aston Martin is focusing on built-to-order retail sales and said its inventory is at the “lowest level ever” which is helping push up average selling prices from £137k in 2020 to £157k so far in 2021. A new online configurator has raised the options take-rate by 20% and retailers are now receiving 300% more “hot leads”.
BBC highlights online car sales ‘boom’
The BBC has reported on the “boom” in online car sales in a widely-read online piece, quoting Cazoo boss Alex Chesterman who admitted that online and offline retailers can still coexist. “We are at less than 2% digital today and maybe we get 20% digital in five years – that still means 80% of the world carries on doing what they are currently doing”.
Online disruptors have “started a ripple effect” with traditional retailers too, said Auto Trader boss Nathan Coe. “What they have done is catalyse the rest of the industry to think ‘hang on, we have got to do more of this online’.”
WORLD NEWS
US private equity firm targets auto retailers with $400m
New York-based Franchise Equity Partners plans to spend $400m over the next three years buying minority stakes in auto retailers. The leadership team includes former Ford sales executive Mark LaNeve and Don Reese, former CEO of used car retailer DriveTime.
The investment will allow auto retailers to do one of three things: expand, buy out existing shareholders, or cash out some of their own ownership stakes to diversify their holdings. “Our capital is meant to be passive,” said cofounder Michael Esposito.
Chrysler exits Australia
Chrysler has pulled out of Australia, its last right-hand drive market. Sales will cease by the end of the year. The Stellantis brand said it had fallen victim to “the global push towards electrification and focus on SUVs”. FCA Australia will now fully focus on the Jeep brand – and all Jeep Australia retailers will continue to offer Chrysler aftersales services.
STOCKWATCH
Closing prices on 19 November 2021 and weekly change
Auto Trader Group 735.0p (+17.0p / +2.3%)
Caffyns 500.0p (n/c)
Cambria 82.5p (n/c)
Halfords 340.0p (+15.0p / +4.5%)
Inchcape 857.0p (+7.0p / +0.8%)
Lookers 60.7p (+0.2p / +0.3%)
Marshall Motor Holdings 284.0p (+16.0p / +5.7%)
Motorpoint 349.0p (-6.0p / -1.7%)
Pendragon 19.3p (-0.05p / -0.2%)
Vertu 64.8p (+3.4p / +5.3%)
COMING UP
Tuesday, SMMT Annual Dinner
Thursday, Motorpoint interims
MONEY MATTERS
Online retail sales fall to pre-pandemic levels
Retail sales rose for the first time in six months during October but ONS data shows online sales fell to levels not seen since the start of the pandemic. The figures will give a boost to physical stores ahead of their busiest season of the year. Consumer confidence also edged up for the first time in four months despite GfK warning consumers appeared to be less positive about their personal finances.
Official Receiver files £1bn claim against KPMG
The Official Receiver filed a claim form against Carillion auditors KPMG on Friday which could target as much as £1bn in damages. City sources say it could be one of the biggest ever in Britain against an accountancy firm. Legal action is expected to allege KMPG failed to spot misstatements in Carillion’s accounts. The claimant has four months to submit more details of its case.
Tags:
Adam Jonas, Aston Martin, Cazoo, Chrysler, EV, KPMG, Morgan Stanley, online, Penske, SMMT, Sonic 
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