Car Industry Recovery: Ford, Renault, Daimler price analysis

Written by: Michael Harris
February 21, 2021
  • Ford announced it will raise its multi-billion investment in electric vehicles
  • Daimler said it has witnessed a strong recovery in car sales, led by China
  • Renault is experiencing major challenges after reporting an €8 billion loss for 2020

The car industry is in a clear recovery mode as major carmakers report soaring sales for the second half of the year. 

Ford raises EV stakes

Ford (NYSE: F) announced this week it will invest $1 billion in its factory in German city Cologne. The existing factory will be modified to allow for the production of electric vehicles (EV). 

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The goal is to have the complete range of its passenger cars in Europe “zero-emissions capable, all-electric or plug-in hybrid” by mid-2026. Ultimately, the entire offering should be  all-electric by 2030. 

“Our announcement today to transform our Cologne facility, the home of our operations in Germany for 90 years, is one of the most significant Ford has made in over a generation,” Stuart Rowley, president of Ford’s European arm, said

“It underlines our commitment to Europe and a modern future with electric vehicles at the heart of our strategy for growth,” he added.

Earlier this month, Ford recorded a net loss of $2.8 billion in the fourth quarter, compared to a net loss of $1.7 billion a year earlier. The company reported its revenue for the full-year fell 18% to $127 billion.

The company committed $29 billion for EVs and autonomous vehicles (AVs). 

“We watched one out of 10 vehicles sold in Europe in December be pure electric. EV sales in China continue to grow, and the reality is that customers, including in the US, are increasingly giving e-mobility greater consideration,” said Ford CEO Jim Farley. “We have no intention to cede ground to others.”

Ford monthly chart (TradingView)

Technically speaking, shares of Ford are up about 10% in February after gaining nearly 20% in January. The price action stopped at the 100-MMA above the $12 mark, which will continue to act as resistance in the short-term. 

Daimler posts strong results

Similar to Ford, Mercedes Benz owner Daimler (EPA: DAI) said the car industry is currently undergoing a transformation. 

“Next to the things that we know well — to build, frankly, the world’s most desirable cars — there are two technological trends that we’re doubling down on: electrification and digitization,” he said.

The Mercedes-Benz maker was investing billions of dollars into innovation and CO2-free driving, Källenius said, adding that this decade is expected to be “transformative”. 

On the results front, Daimler AG said today it expects a substantial increase in sales and operating profit this year thanks to a strong recovery from the coronavirus pandemic. The carmaker said it believes it will compensate for production losses it sustained due to a deficit of semiconductor chips.

The Mercedes-Benz maker said the shortage of chips is expected to hurt its sales only in the first quarter. The majority of carmakers have faced the same challenges lately because of this deficit.

Daimler also confirmed its preliminary earnings results for last year and added it expects no further difficulties from the pandemic ahead. The carmaker received a large boost in China, the largest auto market in the world as consumers showed high interest in luxury vehicles. 

The German automaker reported last month that its group earnings before interest and taxes (EBIT) for 2020 climbed to €6.60 billion ($7.95 billion), thanks to a strong recovery in the auto industry.

“The year 2020 was a stress test for just about every company in almost every industry,” said Daimler’s CEO Ola Källenius in a statement. “The Daimler team mastered this test very well.”

Going forward, the company anticipated group revenue and operating profit for this year to increase by over 7.5%, and the adjusted margin from its Mercedes cars and van business to rise between 8% and 10%.

Daimler monthly chart (TradingView)

Shares of Daimler are now up over 15% in February as the strong V-shaped recovery continues. The price action broke above the long-term resistance of €60.00 to open the road towards the next resistance line at €76.00.

Renault struggles to gain traction

Unlike Daimler, the French carmaker Renault (EPA: RNO) reported a huge loss for 2020 and a challenging outlook for the ongoing year. The company reported a loss of €8 billion ($9.71 billion) for 2020, which is worse than the €7.4 billion expected from the market analysis.

“2021 is set to be difficult given the unknowns regarding the health crisis as well as electronic components supply shortages,” De Meo said.

Renault is looking to cut costs but maintain its competitiveness while the company is also suffering from the shortage in semiconductor chips which is battering the entire car industry. 

“It’s a continuous battle until, I think, the end of the year, but we believe the supply shortage will ease in the second half, but we just have to fight. It is very hard to say what will be the exact, precise impact,” De Mao added. 

Ford weekly chart (TradingView)

Renault said that its sales were still going down in the second half of 2020 but at a slower pace. As expected, the Renault stock price closed the last week in the red. The price action is now testing the 100-WMA near €37.00. 

Summary

Mercedes Benz owner Daimler reported numbers that show strong recovery is in play, which is the opposite of what Renault is experiencing. Ford, on the other hand, has further increased investment in EVs.