Tag Archives: Passenger Cars

Business

GM’s U.S. Sales Recovered From Early 2022 Woes to Post Full-Year Rise

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The U.S.’s largest auto makers confronted another challenging year in 2022 with supply-chain snarls and poorly stocked dealership lots denting sales results and concerns mounting about an economic downturn.

The Detroit auto maker also retook its U.S. sales crown from

Toyota Motor Corp.

TM -0.65%

, outselling its Japanese rival by about 165,630 vehicles last year.

Toyota had overtaken GM in 2021 as the U.S.’s top-selling auto maker, an upending of the traditional pecking order that was largely due to parts shortages that both car companies viewed as temporary.

Toyota said its U.S. sales were down 9.6% in 2022, and

Hyundai Motor Corp.

closed last year with a 2% decline.

Most other car companies report throughout the day Wednesday.

Ford

plans to report 2022 sales results Thursday.

Industrywide, U.S. auto sales are projected to total 13.7 million vehicles in 2022, the lowest figure in more than a decade and an 8% decrease from the prior year, according to a joint forecast by J.D. Power and LMC Automotive. Sales are expected to remain well below prepandemic levels of roughly 17 million.

WSJ toured Rivian’s and Ford’s electric-vehicle factories to see how they are pushing to meet demand. Illustration: Adam Falk/The Wall Street Journal

The drop-off marks a reversal for a sector that started the year hoping historically low interest rates and an end to parts shortages would fuel a rebound in sales. Instead, vehicles continued to be in short supply as car makers mostly waited for scarce computer chips. Russia’s invasion of Ukraine, a key supplier of auto parts, added to the supply-chain troubles.

A prolonged shortage of semiconductors created pent-up demand for new vehicles, which meant that cars and trucks went to waiting buyers almost as soon as they hit the dealer lot. The lack of availability left buyers paying top dollar for the rides they could secure, pushing the average price paid for a vehicle in December to a near record high of $46,382, according to J.D. Power.

The record high prices buoyed auto maker profits last year despite shrinking sales volume and insulated the industry from a broader decline in consumer spending. 

Now, while some supply constraints are easing, auto executives are confronting other obstacles, such as rising interest rates and soaring materials costs. Inventory levels are bouncing back, putting pressure on car companies to resist the kinds of profit-damaging discounts that have been historically used to counter slowing demand.  

Photos: The EV Rivals Aiming for Tesla’s Crown in China

Some analysts caution that it is still too early to tell if rising prices are pushing buyers away. Heavy snowfall in large parts of the northern U.S. weighed on December sales, making it hard to see the impact of higher prices, JPMorgan analysts wrote in a note to clients. 

Still, there are early signs that demand might be slowing, even for the hottest car makers.

Tesla Inc.

reported Monday that it fell short of its growth projections last year, in part because of Covid-related shutdowns at its Shanghai factory and changes in the way it manufactures and distributes vehicles.

Analysts have pointed to decreased wait times for Tesla vehicles as a sign of softening demand. Tesla offered a rare discount on some of its vehicles if buyers agreed to take delivery before the end of 2022.

Electric-vehicle sales accounted for 3% of the U.S. retail market in 2021 and nearly 6% in 2022, according to J.D. Power.

Executives have been investing billions of dollars on new models and factories, in the belief that sales will continue to expand rapidly over the next decade.

But rising prices for raw materials used in lithium-ion batteries pushed up EV prices throughout 2022, and some executives warned of a looming battery shortage. 

General Motors cut its EV sales target for 2023 because of a slower-than-expected increase of battery production.

The semiconductor shortage, while easing for some other sectors, such as smartphones and personal computers, remains a challenge for autos, in part because car companies typically use inexpensive, commodity silicon for vehicles. Toyota, citing a lack of chips, cut its production outlook for the current fiscal year through March.

Falling used-car values are also discouraging to potential buyers, who have trade-ins and are looking to use them to offset the higher cost of a new vehicle. 

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What is your outlook on the auto industry for 2023? Join the conversation below.

That bodes poorly for sales this year, as retailers worry that buyers who were unable to buy a car as a result of shortages will now be priced out of the market, according to a survey of dealers conducted by Cox Automotive.

The research site Edmunds expects new-car sales to hit 14.8 million in 2023, a marginal increase from last year but well below prepandemic levels. A combination of rising rates, inflation and economic turmoil could push vehicles out of reach for many buyers, Edmunds said.

Write to Sean McLain at sean.mclain@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Tesla, GM Among Car Makers Facing Senate Inquiry Into Possible Links to Uyghur Forced Labor

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WASHINGTON—The Senate Finance Committee has opened an inquiry into whether auto makers including

Tesla Inc.

and

General Motors Co.

are using parts and materials made with forced labor in China’s Xinjiang region.

In a letter sent Thursday, the committee asked the chief executives of eight car manufacturers to provide detailed information on their supply chains to help determine any links to Xinjiang, where the U.S. government has alleged the use of forced labor involving the Uyghur ethnic minority and others.

The U.S. bans most imports from the region under the Uyghur Forced Labor Prevention Act. The letter to car companies cited a recent report from the U.K.’s Sheffield Hallam University that found evidence that global auto makers were using metals, batteries, wiring and wheels made in Xinjiang, or sourcing from companies that used Uyghur workers elsewhere in China.

According to that report, some car manufacturers “are unwittingly sourcing metals from the Uyghur region.” It said some of the greatest exposure comes from steel and aluminum parts as metals producers shift work to Xinjiang to take advantage of Chinese government subsidies and other incentives.

The U.S. ban on products linked to Xinjiang has already caused disruptions in the import of solar panels made there.

China has called Washington’s claim baseless. It disputes claims by human-rights groups that it mistreats Uyghurs by confining them in internment camps, with Beijing saying its efforts are aimed at fighting terrorism and providing vocational education.

Besides

Tesla

and GM, the letter signed by Finance Committee Chairman

Ron Wyden

(D., Ore.), was sent to

Ford Motor Co.

,

Mercedes-Benz Group AG

,

Honda Motor Co.

,

Toyota Motor Corp.

,

Volkswagen AG

and

Stellantis

NV, whose brands include Chrysler and Jeep.

GM said its policy prohibits any form of forced or involuntary labor, abusive treatment of employees or corrupt business practices in its supply chain.

“We actively monitor our global supply chain and conduct extensive due diligence, particularly where we identify or are made aware of potential violations of the law, our agreements, or our policies,“ the company said.

A Volkswagen spokesman said the company investigates any alleged violation of its policy, saying “serious violations such as forced labor could result in termination of the contract with the supplier.” A Stellantis spokesperson said the company is reviewing the letter and the claims made in the Sheffield Hallam study.

Other companies didn’t immediately provide comments.

“I recognize automobiles contain numerous parts sourced across the world and are subject to complex supply chains. However, this recognition cannot cause the United States to compromise its fundamental commitment to upholding human rights and U.S. law,” Mr. Wyden wrote.

The information requested includes supply-chain mapping and analysis of raw materials, mining, processing and parts manufacturing to determine links to Xinjiang, including manufacturing conducted in third countries such as Mexico and Canada. 

General Motors says its policy prohibits forced or involuntary labor, abusive treatment of employees or corrupt business practices in its supply chain.



Photo:

mandel ngan/Agence France-Presse/Getty Images

The lawmakers are also asking the auto makers if they had ever terminated, or threatened to terminate, relations with suppliers over possible links to Xinjiang, and if so, provide details of the cases.

The committee’s action comes as the Biden administration and bipartisan lawmakers increase their focus on alleged forced-labor practices in China as a key component of their confrontation with Beijing over its economic policy. The United Auto Workers has called on the auto industry to “shift its entire supply chain out of the region.” 

The State Department has said more than one million Uyghurs and other minorities are held in as many as 1,200 state-run internment camps in Xinjiang. Chinese authorities “use threats of physical violence” and other methods to force detainees to work in adjacent or off-site factories, according to the department.

The U.S. Customs and Border Protection investigated 2,398 entries with a total value of $466 million during the fiscal year ended September, up from 1,469 entries in the previous year and 314 cases in fiscal 2000.

Analysts expect the CBP’s enforcement activity to further increase this year, with a strong bipartisan push for a tougher stance on the forced-labor issue.  

The researchers at Sheffield Hallam University found that more than 96 mining, processing, or manufacturing companies relevant to the auto sector are operating in Xinjiang. The researchers used publicly available sources, including corporate annual reports, websites, government directives, state media and customs records.

Write to Yuka Hayashi at Yuka.Hayashi@wsj.com

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Business

Dow falls nearly 500 points after strong data, bearish comments by David Tepper

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U.S. stocks traded lower on Thursday, erasing most of their gains from their biggest rally in three weeks after a round of upbeat economic data and a warning from hedge-fund titan David Tepper that he was “leaning short” against both stocks and bonds on expectations the Federal Reserve and other central banks will continue tightening into 2023.

Positive economic news can be a negative for stocks by underlining expectations that monetary policy makers will remain aggressive in their efforts to quash inflation.

What’s happening
  • The Dow Jones Industrial Average
    DJIA,
    -1.51%
    fell 472 points, or 1.4%, to 32,903.
  • The S&P 500
    SPX,
    -1.99%
    shed 71 points, or 1.8%, to 3,807.
  • The Nasdaq Composite
    COMP,
    -2.84%
    fell 272 points, or 2.5%, to 10,437.

A day earlier, all three major indexes recorded their best gain in three weeks as the Dow advanced 526.74 points.

What’s driving markets

Investors saw another raft of strong economic data Thursday morning, including a revised reading on third-quarter gross domestic product which showed the U.S. economy expanded more quickly than previously believed. Growth was revised up to 3.2%, up from 2.9% from the previous revision released last month.

See: Economy grew at 3.2% rate in third quarter thanks to strong consumer spending

The number of Americans who applied for unemployment benefits in the week before Christmas rose slightly to 216,000, but new filings remained low and signaled the labor market is still quite strong. Economists polled by The Wall Street Journal had forecast new claims would total 220,000 in the seven days ending Dec 17.

“Jobless claims ticking slightly up but coming in below expectations could be a sign that the Fed’s wish of a slowing labor market will have to wait until 2023. While weekly jobless claims aren’t the best indicator of the overall labor market, they have remained in a robust range these last two months suggesting the labor market remains strong and has withstood the Fed’s tightening, at least for the time being,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office, in emailed comments.

“While weekly jobless claims aren’t the best indicator of the overall labor market, they have remained in a robust range these last two months suggesting the labor market remains strong and has withstood the Fed’s tightening, at least for the time being,” he wrote. “It’s no surprise to see the market take a breather today after yesterday’s rally as investors parse through earnings data, and despite some beats this week, expectations that earnings will remain as resilient in 2023 may be overblown.”

Stocks were feeling pressure after Appaloosa Management’s Tepper shared a cautious outlook for markets based on the expectation that central bankers around the world will continue hiking interest rates.

“I would probably say I’m leaning short on the equity markets right now because the upside-downside doesn’t make sense to me when I have so many people, so many central banks, telling me what they are going to do, what they want to do, what they expect to do,” Tepper said in a CNBC interview.

Key Words: Billionaire investor David Tepper would ‘lean short’ on stock market because central banks are saying ‘what they’re going to do’

A day earlier, the Conference Board’s consumer confidence survey came in at an eight-month high, which helped stoke a rally in stocks initially spurred by strong earnings from Nike Inc. and FedEx Corp. released Tuesday evening. This optimistic outlook helped stocks clinch their best daily performance in three weeks.

Volumes are starting to dry up as the year winds down, making markets more susceptible to bigger moves. According to Dow Jones Market Data, Wednesday saw the least combined volume on major exchanges since Nov. 29.

Read: Is the stock market open on Monday after Christmas Day?

In other economic data news, the U.S. leading index fell a sharp 1% in November, suggesting that the U.S. economy is heading toward a downturn.

Many market strategists are positioned defensively as they expect stocks could tumble to fresh lows in the new year.

See: Wall Street’s stock-market forecasts for 2022 were off by the widest margin since 2008: Will next year be any different?

Katie Stockton, a technical strategist at Fairlead Strategies, warned clients in a Thursday note that they should brace for more downside ahead.

“We expect the major indices to remain firm next week, helped by oversold conditions, but would brace for more downside in January given the recent downturn,” Stockton said.

Others said the latest data and comments from Tepper have simply refocused investors on the fact that the Fed, European Central Bank and now the Bank of Japan are preparing to continue tightening monetary policy.

“Yesterday was the short covering rally, but the bottom line is the trend is still short and we’re still fighting the Fed,” said Eric Diton, president and managing director of the Wealth Alliance.

Single-stock movers
  • AMC Entertainment Holdings 
    AMC,
    -14.91%
    was down sharply after the movie theater operator announced a $110 million equity capital raise.
  • Tesla Inc. 
    TSLA,
    -8.18%
    shares continued to tumble as the company has been one of the worst performers on the S&P 500 this year.
  • Shares of Verizon Communications Inc. 
    VZ,
    -0.53%
    were down again on Thursday as the company heads for its worst year on record.
  • Shares of CarMax Inc. 
    KMX,
    -6.60%
    tumbled after the used vehicle seller reported fiscal third-quarter profit and sales that dropped well below expectations.
  • Chipmakers and suppliers of equipment and materials, including Nvidia Corp.
    NVDA,
    -8.60%,
    Advanced Micro Devices 
    AMD,
    -7.17%
    and Applied Materials Inc.
    AMAT,
    -8.54%,
    were lower on Thursday.

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Business

Carvana Faces Cash Crunch From High Debt, Rising Interest Rates

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Carvana Co.

CVNA -3.13%

, the used-car dealer that was a pandemic winner, is rushing to conserve cash as once-plentiful financing options dry up and business deteriorates.

On Friday, Carvana laid off about 1,500 people, its second round in six months. Its weakening finances mean raising funds would be difficult and costly, and it could run out of cash in a year, analysts say.

Few companies have been hit harder by rising interest rates than Carvana. The company’s interest expense nearly doubled early this year when it paid up to get financing for an acquisition. Its cost to finance car purchases is up by three-quarters this year, and some of its real estate has lost value. Car buyers, meanwhile, are holding off purchases in the hope that rates fall.

In a memo to Carvana’s employees announcing the layoffs, Chief Executive

Ernie Garcia III

blamed an uncertain economic environment that he said was particularly tough on fast-growing companies that sell products affected by higher interest rates. “We failed to accurately predict how this would all play out and the impact it would have on our business,” he said.

The company said it has millions of satisfied customers, and that disrupting the auto industry isn’t easy. “We have seen many e-commerce companies written off early in their journey only to become market leaders. We plan to follow suit,” a spokesman said. Earlier this month, Carvana executives said cash flows and profitability are the strategic focus now.

WSJ’s Ben Foldy explains the factors that helped drive Carvana’s growth and why investors are now questioning its future. Illustration: Preston Jessee

Carvana became wildly popular among car buyers, with heavy advertising and haggle-free cars delivered to their doors. Investors bought in, driving the shares up more than sixfold. The stock has fallen more than 97% from its peak last year. Carvana’s bonds are trading at distressed levels. 

“They built an infrastructure across the enterprise with the assumption that the growth would be there,” said Daniel Imbro, a managing director at Stephens Inc. 

The ratings firm S&P Global Ratings warned that Carvana’s liquidity likely would erode faster than expected, and changed the outlook on its CCC+ rating to negative earlier this month. It said the company’s standing to raise more cash from stock and bond investors has deteriorated.

Less than a year ago, Carvana was still trying to keep up with demand. In February, it agreed to buy a car-auction business that would help boost inventory. Car sales slowed, though. 

The day the deal was completed in May, Mr. Garcia said it had overshot on growth and laid off 2,500 workers. Days earlier, it had issued a $3.275 billion bond with a 10.25% coupon to fund the purchase. The high coupon almost doubled Carvana’s annual interest expense and reflected investors’ fears of a recession and rising inflation. 

Carvana CEO Ernie Garcia III and his father, Ernest Garcia II, when the company went public in 2017.



Photo:

Michael Nagle/Bloomberg News

Carvana thrived when interest rates were low because it could borrow cheaply to buy cars and make loans to customers. Its credit line from

Ally Financial

to buy cars had an average 2.6% interest rate last year, compared with 4.5% at the end of September. Ally required Carvana to set aside 12.5% of the amount borrowed as of late September, up from 7.5%, further tightening its cash situation. An Ally spokesman declined to comment.

Carvana earned big profits selling its car loans to investors who were hungry for yield. Gains from the loans help Carvana offset the losses it makes selling cars. When investors turned choosier on these securities in the spring, Carvana sold many of the loans to Ally instead, on less-favorable terms. The gains it books from loan sales fell by around one-third in the third quarter from the year-earlier period.

Mr. Garcia told analysts on a call Nov. 3 that the company would keep cutting costs and that it has access to around $4 billion in liquidity, in addition to its $316 million cash and some other assets. The amount includes what it can borrow on credit lines to buy cars and make loans. It also included around $2 billion of real estate, which isn’t typically considered a liquid asset.

The company’s chief financial officer said Carvana could borrow against the real estate, which includes sites it bought this year. It previously raised around $500 million from selling some sites where it inspects cars and then leasing them back for 20 or 25 years. 

That step might work, analysts said, but would also add expenses. They said any real-estate deals would likely occur piecemeal over time, or involve high rent payments because of Carvana’s credit troubles. 

Scott Merkle, a managing partner at SLB Capital Advisors, which specializes in sale-leaseback transactions, said the long-term leases in the space generally rely on financially sound tenants that can be expected to make their lease payments for years. He said that overall conditions for sellers have softened in that market because of higher interest rates, but that sale-leasebacks still provide a better cost of capital for companies than other financing. 

Carvana said it is testing ways to make more from its car sales, such as having customers pick up cars from its vending machines.



Photo:

USA TODAY NETWORK/Reuters

Some Carvana-leased properties have received a tepid response on the market. A 12-story “flagship” car-vending machine in Atlanta that Carvana sold and leased back in December was relisted this summer. It is still on the market, and the asking price has since been lowered.

Carvana said it is testing ways to make more from its car sales, such as taking payment before delivery and having customers pick up cars from its vending machines. 

“We’ve got a bunch of committed liquidity. We’ve got a bunch of real estate, and I think that we feel like that puts us in a good position to ride out this storm,” Mr. Garcia told analysts on the Nov. 3 call.

—Ben Foldy, Will Feuer and Ben Eisen contributed to this article.

Write to Margot Patrick at margot.patrick@wsj.com and Kristin Broughton at Kristin.Broughton@wsj.com

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Business

Apple, Amazon, McDonald’s Headline Busy Earnings Week

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Amazon.

com Inc.,

Apple Inc.

and

Meta Platforms Inc.

are among the tech heavyweights featured in a packed week of earnings that investors will probe for indicators about the broader economy.

Other tech companies scheduled to report their latest quarterly reports include Google parent company

Alphabet Inc.

and

Microsoft Corp.

Investors also will hear from airlines such as

Southwest Airlines Co.

and

JetBlue Airways Corp.

, automotive companies

General Motors Co.

and

Ford Motor Co.

, and energy giants

Chevron Corp.

and

Exxon

Mobil Corp.

Nearly a third of the S&P 500, or 161 companies, are slated to report earnings in the coming week, according to FactSet. Twelve bellwethers from the Dow Jones Industrial Average, including

Boeing Co.

and

McDonald’s

Corp., are expected to report as well.

The flurry of results from a broad set of companies will give a sense of how businesses are faring as they deal with inflation denting consumer spending, ongoing supply-chain challenges and a stronger dollar.

People awaited the release of Apple’s latest iPhones in New York last month. The company will report quarterly results on Thursday afternoon.



Photo:

ANDREW KELLY/REUTERS

One area holding up to the challenges has been travel. Several airline companies have reported that consumers still have an appetite to spend on trips and vacations. On Friday,

American Express Co.

raised its outlook for the year in part because of a surge in travel spending.

“We expected the recovery in travel spending to be a tailwind for us, but the strength of the rebound has exceeded our expectations throughout the year,” American Express Chief Executive

Stephen Squeri

said.

In addition to airlines reporting, companies such as car-rental company

Hertz Global Holdings Inc.

and lodging companies

Hilton Worldwide Holdings Inc.

and

Wyndham Hotels & Resorts Inc.

will offer reads into leisure spending.

Overall, earnings for the S&P 500 companies are on track to rise 1.5% this period compared with a year ago, while revenue is projected to grow 8.5%, FactSet said.

Other companies will serve as a gauge for how consumers have responded to higher prices and whether they have altered their spending as a result.

Coca-Cola Co.

and

Kimberly-Clark Corp.

on Tuesday and

Kraft Heinz Co.

on Wednesday will show how consumers are digesting higher prices.

Mattel Inc.,

set to report on Tuesday, will highlight whether demand for toys remains resilient. Rival

Hasbro Inc.

issued a warning ahead of the holiday season.

United Parcel Service Inc.

will release its results on Tuesday and provide an opportunity to show how it is faring ahead of the busy shipping season. The Atlanta-based carrier’s earnings come weeks after rival

FedEx Corp.

warned of a looming global recession and outlined plans to raise shipping rates across most of its services in January to contend with a global slowdown in business.

Results from credit-card companies

Visa Inc.

and

Mastercard Inc.

will offer insights into whether inflation has finally put a dent in consumer spending after both companies reported resilient numbers last quarter.

Wireless carrier

T-Mobile US Inc.’s

numbers on Thursday will give more context to mixed results from competitors

Verizon Communications Inc.

and

AT&T Inc.

AT&T

issued an upbeat outlook on Thursday after its core wireless business exceeded the company’s expectations, whereas Verizon on Friday said earnings tumbled as retail customers balked at recent price increases.

Other notable companies lined up to report include

Chipotle Mexican Grill Inc.

on Tuesday, chicken giant

Pilgrim’s Pride Corp.

on Wednesday and chip maker

Intel Corp.

on Thursday.

Write to Denny Jacob at denny.jacob@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Tesla, BYD Break China Delivery Records as EV Rivalry Goes Global

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HONG KONG—

Tesla Inc.

TSLA 0.17%

and its Chinese rival BYD Co. have each broken their monthly records for deliveries of electric vehicles in China as the global competition between the world’s biggest makers of new-energy autos intensifies.

Tesla, the world’s biggest EV maker, delivered more than 83,000 Model 3s and Model Ys from its recently upgraded Shanghai plant in September, data released Sunday by the China Passenger Car Association show. The American EV maker controlled by

Elon Musk

had been ahead of BYD in China before production was disrupted by Covid-19 outbreaks in the country.

BYD made almost 95,000 EV deliveries in September—a record high for the Shenzhen-based company. BYD’s sales, including hybrids, totaled 201,000 units in September, also a record.

The rivalry between the world’s leading EV companies intensified this year after BYD—which counts Mr. Musk’s fellow billionaire

Warren Buffett

among its key investors—abandoned the production of traditional gasoline-powered vehicles to fully focus on new-energy cars.

Production capacity at Tesla’s Shanghai plant was recently increased.



Photo:

Qilai Shen/Bloomberg News

BYD has dominated the Chinese domestic market this year, defying supply-chain disruptions and shortages of chips and raw materials for batteries that have plagued other manufacturers, including Tesla. The company’s monthly year-over-year sales of electric and plug-in hybrid vehicles have risen more than threefold on average this year.

Behind the growth is the company’s ability to produce its own batteries as well as many of the parts its vehicles use, ensuring stability along its supply chain.

Tesla, meanwhile, lost ground after suffering production hiccups from Covid-19 lockdowns in Shanghai earlier this year.

In July, Tesla suspended operations for several days to upgrade its assembly lines for increased production capacity. Its Shanghai plant can now crank out more than 750,000 units a year, the company said at the time.

Tesla said last week it delivered 343,830 EVs globally during the quarter ended Sept. 30. Vehicles from Shanghai made up about 54% of its global deliveries during this period, up from 44% in the second quarter, according to calculations based on the association’s data.

The climate bill recently passed by the Senate could knock thousands of dollars off the sticker price of electric vehicles, but it’s also redefining which cars are eligible. WSJ’s George Downs breaks down the new rules and what it means for the EV industry. Illustration: George Downs

While Tesla tussles with BYD in its home market, the Shenzhen-based auto maker is also expanding abroad. Last week, German rental-car company

Sixt SE

said BYD will supply its fleet with several thousand EVs by the end of this year. The initial commitment will pave the way for the German company to purchase a total of 100,000 EVs from BYD by the end of 2028, Sixt said.

BYD’s foray into Europe began with supplying electric buses for public transport in countries including the U.K., Sweden and Spain. Last year, it exported 100 Tang sports-utility EVs to Norway.

This past summer BYD announced partnerships with dealers in several European countries to distribute its vehicles. By September this year, BYD began selling its EVs to customers in Australia. It exported some 7,000 EVs or plug-in hybrids from China that month, according to company data.

The company announced European presale prices for three of its popular passenger EV models two weeks ago. They will be made available to customers in Scandinavian countries but also in Luxembourg and Germany, the home turf for legacy car brands such as Volkswagen AG. Sales will roll out to France and the U.K. by the end of this year, the company said.

And as it seeks to capture the global market for EVs, BYD is moving to produce more passenger cars overseas. Last month it secured a deal with Thai industrial-estate developer WHA Group to set up an overseas passenger EV factory on the east coast of Thailand. The plant is expected to deliver 150,000 passenger EVs in 2024, WHA said at the time.

Meanwhile, Mr. Musk weighed in on China’s thorny territorial issues during an interview with the Financial Times. Mr. Musk suggested that a special administrative zone should be set up for the self-governed island of Taiwan, similar to Hong Kong’s relationship with the Chinese mainland. His comments were welcomed by Chinese Ambassador to Washington Qin Gang, who on Sunday tweeted his thanks to Mr. Musk for the suggestion.

China regards Taiwan as an integral part of its territory, to be reunited with the motherland by force, if necessary.

Write to Selina Cheng at selina.cheng@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

He nailed three big S&P 500 moves this year. Here’s where this strategist sees stocks headed next, with beaten down names to buy.

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A Wall Street hat trick may not be on the cards, with stocks in the red for Wednesday.

A two-day rally was never a guaranteed exit out of the bear woods anyway, as some say signs of a durable bottom are still missing.

Enter our call of the day, from the chief market technician at TheoTrade, Jeffrey Bierman, who has made a string of prescient calls on what has been a roller coaster year for the index thus far. He’s also a professor of finance at Loyola University Chicago and DePaul University.

Bierman, who uses quant and fundamental analysis to determine market direction, sees the S&P 500
SPX,
-1.62%
finishing the year between 4,000 and 4,200, maybe around 4,135. “Fourth-quarter seasonality favors bulls following a weak third quarter.  Not to mention most stocks are priced for no growth,” he told MarketWatch in a Monday interview.

In December 2021, he forecast the S&P 500 might see a 20% decline within six months, toward 3,900 — it hit 3,930 in early May. In June, he forecast a rally and recovery to 4,300 — the index hit 4,315 by mid-August.

Speaking to MarketWatch on Aug. 25, Bierman saw a retest of around 3,600 for the index, citing an often rough September for stocks. It closed out last month at a new 2022 low of 3,585.

“I think we’re going to end up for the quarter. [The market is] deeply oversold and some stocks are completely mispriced in terms of their valuation metrics,” said Bierman, who is looking squarely at retail and technology sectors.

“The valuations on half the chip stocks are trading below a multiple of seven. I’ve never seen that ever…but what that means is when the semiconductor sector comes back, the multiple expansion is gonna be like a volcanic eruption to the upside,” he said of the sector known for its boom/bust cycles.

For example, he owns Intel
INTC,
-2.53%,
which hit a five-year low on Friday. Eventually, the company that has invested $20 billion in a new U.S. plant will come roaring back alongside rivals like Advanced Micro
AMD,
-4.65%.
“People will look back on this and go ‘Oh, my God, I can’t believe Intel was at five times earnings,’ which is insanity for this stock.”

For the S&P 500 as a whole next twelve months price/earnings is currently 16.13 times, so Intel’s would be less than half of the broader index, according to FactSet

As for retail, he’s been looking at Urban Outfitters
URBN,
-1.06%,
Macy’s
M,
-1.94%
and Nordstrom
JWN,
-0.67%,
all places where millennials don’t shop, but the middle class does, with the all-important holiday shopping period dead ahead.

“There are 100,000 people being hired to work part time at these companies, and their margins are not coming down at all,” with no markdowns and decent sales, he said, noting those companies are being priced at a multiple of 5 times forward earnings.

“It means that you don’t think that Macy’s can put together for the Christmas quarter a comparative quarter, year over year of greater than 5%? If you don’t then don’t buy it, but I do,” said Bierman. “That’s why I’m willing to stick my neck out and buy these things. I bought Abercrombie & Fitch
ANF,
-3.78%
at 10 times earnings…I’ve never seen it that low.”

For those who aren’t comfortable picking stocks, he says they can still get exposure through exchange-traded funds, such as SPDR S&P Retail
XRT,
-2.58%
or the Technology Select Sector SPDR ETF
XLK,
-1.70%.

Bierman adds that investors need to be careful not to be overly concentrated in the top stocks, given “10 stocks accounted for 45% of the Nasdaq and the fact that 25% of the S&P almost accounted for about 50% of the S&P movement.”

“Everbody’s concentrated in 10 stocks that can still fall another 30% or 40%, like Apple and Microsoft. The idea of concentration risk is that everybody owns Apple, everybody owns Amazon,” he said.

And that could force the hand of passive and active managers heavily invested in those big names, driving a 10% drop for markets that “washes away all other stocks.”

The markets

Stocks
DJIA,
-1.21%

SPX,
-1.62%

COMP,
-2.19%
are in the red, and bond yields
TMUBMUSD10Y,
3.783%

TMUBMUSD02Y,
4.199%
are up, along with the dollar
DXYN,
.
Silver
SI00,
-5.00%
is retracing some of this week’s big gains, and bitcoin
BTCUSD,
-2.62%
is also off, trading at just over $20,000. Hong Kong stocks
HSI,
+5.90%
surged 6% in a catch-up move following a holiday. New Zealand’s central bank hiked rates a half point, the fifth increase in a row.

The buzz

Oil prices
CL.1,
-0.02%

BRN00,
+0.28%
are flat as OPEC+ reportedly agreed to cut oil production by 2 million barrels a day. Some say don’t be too impressed by any output reduction.

Amazon
AMZN,
-2.34%
will reportedly freeze corporate hires in its retail business for the remainder of 2022.

Mortgage applications fell to the lowest pace in 25 years in the latest week.

The ADP private-sector payrolls report showed 208,000 jobs added in September. The trade deficit narrowed, which should be good news for third-quarter GDP. The Institute for Supply Management’s services index is due at 10 a.m. Atlanta Fed President Raphael Bostic will also speak.

Expect the spotlight to stay on Twitter
TWTR,
-2.53%
after Tesla
TSLA,
-5.16%
CEO Elon Musk committed to the $44 billion deal. But will it feel like a win once he owns it?

Plus: Elon Musk’s legal battle with Twitter may be over, but his war with the SEC continues

EU countries agreed to impose new sanctions on Russia after the illegal annexation of four Ukraine regions. Those moves will include an expected price cap on Russian oil.

South Korea’s missile fired in response to North Korea’s weapon launch over Japan, crashed and burned.

Best of the web

Russians fleeing Putin’s mobilization are finding haven in poor, remote countries.

Consumers are throwing away perfectly good food because of ‘best before’ labels.

The CEO of an election software company has been arrested on accusations of ID theft.

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m. Eastern:

Ticker Security name
TSLA,
-5.16% 		Tesla
GME,
-7.59% 		GameStop
AMC,
-9.56% 		AMC Entertainment
TWTR,
-2.53% 		Twitter
NIO,
-5.92% 		NIO
AAPL,
-1.77% 		Apple
APE,
-8.40% 		AMC Entertainment preferred shares
BBBY,
-8.52% 		Bed Bath & Beyond
AMZN,
-2.34% 		Amazon
DWAC,
-0.64% 		Digital World Acquisition Corp.
The chart

More market-bottom talk:


Twitter

Random reads

All about the investment manager who caught Yankees’ superstar Aaron Judge’s record-breaking home run.

An iPhone in a 162-year old painting? The internet is stumped.

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Business

Elon Musk Unveils Prototype of Tesla’s Humanoid Robot Optimus, Says It Will Cost Less Than a Car

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Mr. Musk first laid out the vision for the robot, called Optimus, a little more than a year ago at Tesla’s first-ever AI day. At the time, a dancer in a costume appeared onstage. This time, Mr. Musk presented a prototype at the gathering that unfolded late Friday in Palo Alto, Calif.

The early prototype, which still had wires showing, took a few steps, waved to the crowd, and performed some basic dance moves.

Tesla’s robot is expected to cost less than a car, with a price point below $20,000, Elon Musk said.



Photo:

Tesla

Mr. Musk quipped the robot could do a lot more, but limited its activity for fear it could fall on its face. The robot’s appearance on stage marked the first time it operated without a tether, Mr. Musk said.

“Our goal is to make a useful humanoid robot as quickly as possible,” he said, with the aspiration of being able to make them at high volume and low cost. “It is expected to cost much less than a car,” he said, with a price point below $20,000. Customers should be able to receive the robot, once ordered, in three to five years, Mr. Musk said. It isn’t yet for sale.

He later showed off a nonfunctioning, sleeker model that he said was closer to the production version.

“There’s still a lot of work to be done to refine Optimus,” he said, saying that the concept could evolve over time. “It won’t be boring.”

The battery-powered robot should be able to handle difficult chores, Tesla said, including lifting a half-ton, 9-foot concert grand piano. Mr. Musk added it would have conversational capabilities and feature safeguards to prevent wrongdoing by the machine.

Elon Musk last year unveiled the idea of the robot Optimus with a dancer in a costume.



Photo:

TESLA/via REUTERS

“I’m a big believer in AI safety,” said Mr. Musk, who has previously expressed concerns about how such technology could be used. He said he thinks there should be a regulatory authority at the government level.

The Tesla boss painted a vision of Optimus as helping Tesla make cars more efficiently, starting with simple tasks and then expanded uses. He has also suggested the robot could serve broader functions and potentially alleviate labor shortages.

“It will, I think, turn the whole notion of what’s an economy on its head, at the point at which you have no shortage of labor,” Mr. Musk said Aug. 4 at Tesla’s annual shareholder meeting. On Friday, he added: “It really is a fundamental transformation of civilization as we know it.”

Elon Musk unveiled a prototype of Tesla’s humanoid robot Optimus, part of an effort to shape perception of the company as more than just a car maker. The Tesla CEO said the robot is expected to cost less than a car. Photo: Tesla

When he first unveiled the Optimus concept, Mr. Musk said such a robot could have such an impact on the labor market it could make it necessary to provide a universal basic income, or a stipend to people without strings attached.

Tesla has also encountered problems with automation. Early efforts to rely heavily on automated tools to scale up vehicle production suffered setbacks, and the company had to rely more heavily than planned on factory workers. Mr. Musk later tweeted: “Yes, excessive automation at Tesla was a mistake. To be precise, my mistake. Humans are underrated.”

One of the big questions around Tesla’s humanoid robot is its central purpose, said

Chris Atkeson,

a Carnegie Mellon University robotics professor. If Tesla’s main goal is to improve manufacturing, a quadruped likely would have been easier to build than a humanoid robot, in part because additional legs make it easier to balance, he said.

SHARE YOUR THOUGHTS

What do you think of the Tesla robot? Join the conversation below.

Mr. Musk, who has been instrumental in popularizing electric vehicles and pioneered landing rocket boosters with his company SpaceX, also has a record of making bold predictions that don’t immediately pan out. Three years ago at an event about automation, he projected that more than a million Tesla vehicles would be able to operate without a driver by the middle of 2020, positioning the company to launch a robot taxi service. That hasn’t happened.

Mr. Musk for some time has said Tesla aimed to be more than just a car company and reiterated that message on Friday. He called the company “a series of startups.”

Mr. Musk billed the latest event, like last year’s, as one aimed at recruiting engineers in fields such as artificial intelligence, robotics and chips.

Tesla has long bet on automation to keep the company ahead of competitors. The company’s cars are outfitted with an advanced driver-assistance system, known as Autopilot, that helps drivers with tasks such as maintaining a safe distance from other vehicles on the road and staying centered in a lane.

Tesla engineers detailed some of the AI work the company is doing, including to underpin its driver-assistance technology. Mr. Musk said the company’s development of a powerful, AI-focused computer could allow Tesla to offer the number-crunching capability as a service to others, not unlike cloud-computing offerings provided by the likes of

Amazon.com Inc.

The company is developing and selling an enhanced version of Autopilot that brings more automated driving into cities. Tesla calls the system Full Self-Driving, or FSD, although it doesn’t actually make vehicles autonomous and the company tells drivers to keep their hands on the wheel while operating the car.

Tesla said Friday that it now has 160,000 customers with the software. Mr. Musk said rollout of the technology beyond the U.S. and Canada depends on gaining regulatory approval, though it should be feasible from a technology perspective by year-end.

Tesla has steadily raised the price of FSD, which now retails for $15,000. AI has been at the heart of Tesla’s efforts to develop more advanced driver-assistance features and, eventually, fully autonomous vehicles.

Tesla said the software that is used to take on more driving functions also underpins operations of the humanoid robot.

Tesla’s pursuit of automation has increasingly come under scrutiny. The National Highway Traffic Safety Administration, which regulates auto safety, opened a probe into Autopilot last year after a series of crashes involving Teslas that struck first-responder vehicles stopped for roadway emergencies.

Two U.S. senators have also asked the Federal Trade Commission to investigate whether Tesla has been deceptive in its marketing of Autopilot and FSD.

The electric-car maker has long said that driving with Autopilot engaged is safer than doing so without it. Tesla points to internal data showing that crashes were less common when drivers were using Autopilot, though some researchers have criticized the company’s methodology.

Write to Meghan Bobrowsky at Meghan.Bobrowsky@wsj.com and Rebecca Elliott at rebecca.elliott@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Ford stock drops more than 4% as supply costs to jump by $1 billion, parts shortages to leave more cars unfinished

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Ford Motor Co. shares dropped more than 4% in the extended session Monday after the company said inflation and parts shortages will leave it with more unfinished vehicles than it had expected, reminding Wall Street supply-chain snags are far from over for auto makers.

Ford
F,
+1.43%
said it expects to have between 40,000 and 45,000 vehicles in inventory at the end of the third quarter “lacking certain parts presently in short supply.”

The auto maker also said that based on its recent negotiations, payments to suppliers will run about $1 billion higher than expected for the quarter, thanks to inflation. The company reaffirmed its outlook for the year, however.

Ford’s warning “is evidence that auto parts shortages and supply-chain issues are still ongoing,” CFRA analyst Garrett Nelson told MarketWatch.

Many investors had started to believe “these problems were in the rearview mirror with inventories starting to recover from the record lows of the last year or so,” Nelson said.

The unfinished vehicles include high-demand, high-margin models of popular trucks and SUVs, Ford said. That will cause some shipments and revenue to shift to the fourth quarter.

“Ironically, Ford may have become a victim of its own success in that its recent U.S. sales growth has outperformed peers by a wide margin,” Nelson said. Its third-quarter production “apparently wasn’t able to keep pace with demand.”

Ford reiterated expectations of full-year 2022 adjusted earnings before interest and taxes of between $11.5 billion and $12.5 billion, despite the shortages and the higher payments to suppliers, it said.

Ford called for third-quarter adjusted EBIT of between $1.4 billion and $1.7 billion.

Shares of Ford ended the regular trading day up 1.4%. The company has embarked on a reorganization to pivot to electric vehicles, and last month confirmed layoffs in connection with its new structure.

Ford is slated to report third-quarter financial results on Oct. 26, when it said it expects to “provide more dimension about expectations for full-year performance.”

Analysts polled by FactSet expect the auto maker to report adjusted earnings of 51 cents a share, which would match the third-quarter 2021 adjusted EPS, on revenue of $38.8 billion.

The quarterly sales would compare with $35.7 billion in revenue in the year-ago period.

Shares of Ford slid 4.4% after hours, and have lost 28% so far this year, compared with losses of 18% for the S&P 500 index
SPX,
+0.69%.

The news comes a week after FedEx Corp.
FDX,
+1.17%
roiled markets and raised fears of an economic slowdown by withdrawing its outlook for the year and warning that the year was likely to become worse for the business.

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Business

Ray Dalio says watch out for rates reaching this level, because Wall Street stocks will take a 20% hit

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After that CPI shock earlier in the week, Wall Street is fielding a fresh batch of data on Thursday, with the headline retail sales number coming in stronger than expected. And a disastrous rail strike may be inverted.

But there’s no cheering up billionaire investor and hedge-fund manager Ray Dalio who in our call of the day asserts the Fed has no choice but to keep driving up interest rates, at a high price to stocks.

And he’s putting some fairly precise guesswork out there. “I estimate that a rise in rates from where they are to about 4.5% will produce about a 20% negative impact on equity prices,” Dalio said in a LinkedIn post dated Tuesday.

Some are forecasting the Fed could hike interest rates by 100 basis points next week, a move not seen since the likewise inflationary 80s. The central bank’s short-term rate hovers between 2.25% to 2.5%, but Nomura, for one, sees that rate headed to 4.75% by 2023.

But Dalio thinks interest rates could even reach the higher end of a 4.5%-to-6% range. “This will bring private sector credit growth down, which will bring private sector spending, and hence the economy down with it,” he says.

Behind this prediction is the Bridgewater Associates founder belief that the market is severely underestimating where inflation will end up — at 2.6% over the next 10 years versus what he sees as 4.5% to 5% in the medium term, barring shocks.

Read: Why a single U.S. inflation report roiled global financial markets — and what comes next

As for what happens when people start losing money in the markets — the so-called “wealth effect” — he expects less spending as they and their lenders grow more cautious.

“The upshot is that it looks likely to me that the inflation rate will stay significantly above what people and the Fed want it to be (while the year-over-year inflation rate will fall), that interest rates will go up, that other markets will go down, and that the economy will be weaker than expected, and that is without consideration given to the worsening trends in internal and external conflicts and their effects.”

The markets

Stock futures
ES00,
-0.25%

YM00,
+0.02%

NQ00,
-0.48%
are slightly lower post data, as Treasury yields
TMUBMUSD10Y,
3.437%

TMUBMUSD02Y,
3.852%
keep climbinging and the dollar
DXY,
-0.10%
firms up.

Oil prices
CL.1,
-1.63%
are lower, along with gold
GC00,
-0.83%.
China stocks
SHCOMP,
-1.16%

HSI,
+0.44%
slipped after the country’s central bank left rates unchanged. European natural-gas prices
GWM00,
+4.13%
are on the rise again. Bitcoin
BTCUSD,
+0.64%
is trading at just over $20,000.

The buzz

Shares of Union Pacific
UNP,
-3.69%,
Norfolk Southern 
NSC,
-2.16%
and CSX
CSX,
-1.05%
 are rallying in premarket after the White House said it has reached a tentative railway agreement with unions. No deal by Friday would mean strikes and havoc for supply chains, grain markets and even the coming holidays. Read more here.

August retail sales rose a stronger-than-expected 0.3% as Americans spent on new cars while weekly jobless claims came in lower for a fifth-straight week and import prices dropped 1%. Elsewhere, the Empire State manufacturing index perked up on the heels of a deep negative reading, but the Philly Fed factory index worsened. Industrial production and business inventories are still to come.

Adobe shares
ADBE,
+0.85%
are dropping after a report the software company is mulling a $20 billion deal to buy graphic design startup Figma .

Vitalik Buterin, one of the co-founders of Ethereum, says the so-called “merge” is done, meaning the birth of a more environmentally friendly crypto. Ethereum
ETHUSD,
-1.22%
is up just a little right now.

A new lawsuit claims Tesla
TSLA,
+3.59%
has made false promises over Autopilot and Full Self Driving features. And move over Tesla, Apple
AAPL,
+0.96%
is now Wall Street’s biggest short bet.

Ericsson
ERIC,
-3.32%

ERIC.A,
-1.78%

ERIC.B,
-3.34%
is dropping after a double downgrade at Credit Suisse, who cited inflationary headwinds. Analysts lifted Nokia
NOKIA,
-0.51%

NOK,
-0.40%
to outperform, though the stock is barely moving.

Cathie Wood’s Ark Investment Management went on a dip-buying spree after Tuesday’s market meltdown, scooping up chiefly Roku
ROKU,
+0.44%.

Opinion: Pinterest never considered itself a social network. Until now.

Patagonia billionaire Yvon Chouinard is donating his entire company — worth $3 billion — to the climate fight.

Best of the web

No U.S. shale rescue for Europe.

Turkey finds an extra $24.4 billion laying around.

Queue to pay respects to Queen is 2.6 miles long and counting.

The tickers

These were the top-searched tickers on MarketWatch as of 6 a.m. Eastern Time:

Ticker Security name
TSLA,
+3.59% 		Tesla
GME,
+1.01% 		GameStop
AMC,
+1.95% 		AMC Entertainment
BBBY,
+4.66% 		Bed Bath & Beyond
HKD,
+311.78% 		AMTD Digital
NIO,
-0.14% 		NIO
AAPL,
+0.96% 		Apple
APE,
+0.94% 		AMC Entertainment preferred shares
AMZN,
+1.36% 		Amazon
NVDA,
-0.02% 		Nvidia
Random reads

Scientists try to teach robots comedic timing

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