On the Move, July 22 -28, 2024

Umicore faces €1.6bn impairment due to electric car sales slowdown

Belgian chemicals group Umicore announced a €1.6bn impairment on its battery materials business due to a sharp slowdown in global electric car sales. The company expects at least 18 months of delays in customer demand ramp-up, leading to reduced expansion in Europe and South Korea. Plans for a large battery recycling plant in Europe have been delayed to 2032. The writedown follows a profit forecast cut for the division, with global EV sales declining, including Tesla and Stellantis. Umicore will use cash from its catalytic converter business to support its battery materials unit.

Elon Musk seeks Tesla board's nod for $5bn investment in xAI start-up

Elon Musk plans to seek Tesla board approval for a $5bn investment in his AI start-up, xAI. This potential move follows a social media poll showing 68% of public support. Tesla, aiming to rebrand as a robotics and AI firm, sees this investment aiding its autonomous "robotaxis" and humanoid robots projects. However, concerns about conflicts of interest among Musk's companies, including Tesla, SpaceX, and Neuralink, may resurface. This week, Tesla's stock dropped 10% as quarterly profits fell 45% due to high costs and slower sales. Musk has faced scrutiny for reallocating Tesla resources to xAI and other ventures. xAI, valued at $18bn, aims to compete with leaders like OpenAI. Tesla's board independence has been questioned, further complicating the proposal.

Porsche warns of profit hit as flooding disrupts aluminium supply

Porsche's profits and revenues are expected to fall short of forecasts this year due to flooding at a key aluminium supplier, causing significant production delays. Shares fell 3% in Frankfurt following the announcement. The disruptions are expected to lower Porsche's operating profit margin to 14-15% and annual sales to €39bn-€40bn. Heavy rains in southern Germany led to the shutdown of aluminium plants in Switzerland, exacerbating supply chain issues. Porsche's EV production is also impacted, with deliveries now projected at 12-13% of total output. The company is still grappling with declining margins and sales in China.

GM halts driverless car project at Cruise amid regulatory issues

General Motors has indefinitely suspended its autonomous vehicle project, Origin, citing regulatory uncertainty and cost concerns. This follows the California DMV's ban on Cruise vehicles after a crash in San Francisco. Cruise staff will now focus on the next-gen Chevrolet Bolt. The suspension caused a $605 million charge in Q2, despite GM's strong financial performance. GM's CEO, Mary Barra, highlighted resumed operations in some cities and noted that efforts may return to Origin in the future. GM shares rose nearly 5% in pre-market trading.

Ford shares drop as rising repair costs dent profits

Ford shares plummeted nearly 12% after second-quarter earnings missed expectations due to a surge in warranty repair costs. The company reported adjusted earnings of 46 cents per share, below the anticipated 68 cents. Warranty expenses increased by $800 million, impacting profits significantly. High interest rates and slowing EV demand added to Ford's challenges. Despite efforts to improve vehicle quality and reduce model complexity, the company faced substantial financial setbacks. Ford maintained its annual guidance, forecasting adjusted operating earnings between $10 billion and $12 billion.

Stellantis and Nissan's profits plummet amid an auto industry downturn

Stellantis and Nissan reported profit declines, fuelling concerns of a prolonged downturn in the auto industry. Stellantis saw a 48% drop in profits to €5.6bn, while Nissan's earnings plunged 99% in the fiscal first quarter. Shares in both companies fell over 10% due to increased competition and slowing electric vehicle sales. Stellantis CEO Carlos Tavares pledged measures to boost US sales, while Nissan slashed its annual profit forecast by almost a fifth. Both companies face challenges from high inventories and pricing pressures, despite substantial investments in EVs.

Volvo revisits hybrid focus, backing off EV-only pledge

Volvo, once firm on its EV-only sales promise by 2030, is now contemplating a hybrid-focused approach due to uneven global EV demand and infrastructure challenges. Despite CEO Jim Rowan's strong belief in electric propulsion, he acknowledged that full electrification will take time. The company will continue investing in its popular hybrid models, serving as a bridge for customers hesitant to switch to fully electric vehicles. Declining EV sales in key markets like the U.S. and China have prompted Volvo to reconsider its all-electric strategy, with some dealers expressing doubts about an EV-only future.