Time to buy the auto sector?

I’m no expert on the auto sector (cue: Steve) but I do like to buy during temporary dislocations. (Like XOM in March 2020.)

The U.S. auto makers are being hit by two problems at once this week: the shortage of semiconductors due to the supply chain delay and also the Covid strikes on the Canadian bridges which are cutting off the supply of auto parts.

https://www.google.com/search?client=firefox-b-1-d&q=for…
https://www.google.com/search?client=firefox-b-1-d&q=GM+…
https://www.google.com/search?client=firefox-b-1-d&q=toy…
https://www.google.com/search?client=firefox-b-1-d&q=hon…

Toyota looks good – low P/E, decent dividend wihich is well covered by earnings. Does it make sense to buy Toyota?

Wendy

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We are also watching this sector. We had been leaning towards TM due to range concerns for EV, but this popped today: States are getting the go-ahead to build a nationwide network of electric vehicle charging stations that would place new or upgraded ones every 50 miles (80 kilometers) along interstate highways as part of the Biden administration’s plan to spur widespread adoption of the zero-emission cars.

The administration on Thursday announced the availability of $5 billion in federal money to states over five years under President Joe Biden’s infrastructure law, sketching out a vision of seamless climate-friendly car travel from coast to coast.

https://abcnews.go.com/Politics/wireStory/states-ahead-build…

Encouraging but " …fast-charger ports, which enable drivers to fully recharge their vehicles in about an hour." Fast is not so fast. Still, it’s good if it gets you home where you can charge fully.

Also watching F and GM, though from a historical and no doubt dated purchaser POV, I have owned 1 GM and 1 Ford, then switching to Toyota and Hyundai. The Ford Taurus was a nightmare for us, our Toyotas and Hyundai last forever, with little maintenance needed over the decades. Hard to own the stock when I resist buying the product.

IP,
not yet in action mode, other than actively monitoring

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What concerns me about the sector is the way the automakers are currently leveraging the “shortage” narrative to jack up prices. I have to laff at GM and Ford waggling their fingers at dealers gouging customers, while the automakers themselves discontinue their more affordable models and brag about their ever higher ATP and GP.

What happens when the “shortage” narrative can no longer be leveraged to enable price gouging?

Steve

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Toyota looks good – low P/E, decent dividend wihich is well covered by earnings. Does it make sense to buy Toyota?

Are you going to invest in the past or in the future?

The Captain’s
last three cars were Toyotas.

At this point I see Ford and VW as the most likely to succeed after Tesla but the Japanese are truly inscrutable. While I was doing executive recruiting I got a Japanese client. People warned me about the Japanese inscrutability, “Hai does not mean yes, it means ‘I understand.’” I had been in sales for a long time and I had learned to judge people. The conversation started as usual, friendly, amicable, western style. When we got down to business a curtain dropped and I might as well have been talking to marble statues for all the feedback I was getting. I had no idea of their reaction. Suddenly they agreed to my proposal, the curtain lifted and we were back to friendly, amicable, western style.

My point is that Toyota might be saying one thing (let’s keep making ICE cars) while preparing to take the EV auto market by storm. Don’t count them out – just yet.

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My point is that Toyota might be saying one thing (let’s keep making ICE cars) while preparing to take the EV auto market by storm. Don’t count them out – just yet.

Toyota is going to build a battery plant in my state (North Carolina) that initially will produce batteries for up to 800,000 cars. They also plan to expand to reach production for 1.2 million cars. Also they are committed to using 100% renewable energy to run the plant.

PSU

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People warned me about the Japanese inscrutability,

Time for another story from the pump seal company (a funny one) One of the engineers was talking about working with some Japanese. The mixed signals drove him crazy, because they would smile, bow, and say “yes, I do not understand”.

The international marketing department had Harold, who spoke fluent German, Afif, who spoke fluent Arabic, and Alex, who spoke fluent Spanish, but, about the time I hired in, they also hired Sho, who both spoke and was Japanese, in the hope he could cut through the cultural barriers.

Steve

Encouraging but " …fast-charger ports, which enable drivers to fully recharge their vehicles in about an hour." Fast is not so fast.

There are different levels of fast. The bill requires chargers to output at least 150 kw to be considered fast. A typical EV gets 3-4 miles per kwh, so a 150 kw charger will charge at 450 to 600 miles in an hour. In reality though the charging rate gradually slows down after 10 - 20 minutes due to heat and/or when the car gets to 80 or 90% of full charge.

But 150 kw isn’t the maximum for these chargers, it is the minimum peak. Most of the Tesla chargers installed in the last 3 years have a peak of 250 kw; and they recently said they will upgrade most of them to 324 kw later this year. Most (half?) of the EA chargers (Volkswagen dieselgate mandated) have a peak of 350 kw. So even 10 minutes at 300 kw will get you 50kwh…enough for 150 - 200 miles in most cars. Real world testing: 5% to 80% in 22 minutes.

Mike

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I like the look of Toyota’s stock. As you note, low PE (10), decent dividend (3.4%) which is well covered by earnings. I and my family have personally owned and loved Toyotas for the majority of my 55 year life. They make a quality product that their buyers love and return to again and again.

I also believe they are a forward thinking company who is not about to be swept aside by the move to EVs. While they did miss a beat when they let Tesla steal much of their luxury car business with their revolutionary EVs, Toyota’s overall business is robust. They are rapidly expanding their hybrid systems into more and more of their lineup, and their plug-in hybrid RAV4 is one of the more interesting plug-in vehicles to come to market recently, and while Ford gets a fair amount of hype for their EVs, Toyota sold nearly twice as many plug-in vehicles as Ford in the US last year.

When they do bring their first full electric vehicle to market in a few months, people will have no worries about its quality and reliability. They’ve been building hybrids with high voltage traction batteries, electric motors and controllers for more than 20 years now, with impeccable quality and reliability.

I’m adding TM to the list of value stocks I’m tracking as potential investments.

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Toyota’s stock … low PE (10), decent dividend (3.4%) which is well covered by earnings

I got those numbers from aaii.com, but I see that Yahoo is showing 2.4% dividend, and looking into it further, appears Yahoo is right.

TM is an ADR. Anyone know of any special tax consequences for dividends from a Japanese ADR?

I’m adding TM to the list of value stocks I’m tracking as potential investments.

Toyota the company has very little to do with Toyota the stock (o the ADR).

Japanese stocks are always cheap (for the last 20 years, not the madness of 1989) for a reason.
Japanese companies don’t care at all about their shareholders. The management thinks it owns the company. The shareholders get dividends, but not much chance of capital appreciation.

Don’t buy Japanese stocks unless you know for a fact that the management thinks like an American management, which, despite many examples to the contrary, on the whole acts pretty responsibly towards the shareholders.

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TM is an ADR. Anyone know of any special tax consequences for dividends from a Japanese ADR?

I don’t know about Japanese ADRs but I had some European ADRs and I was not happy. Everyone wants to take a cut. PITA.

The Captain

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There are different levels of fast. The bill requires chargers to output at least 150 kw to be considered fast. A typical EV gets 3-4 miles per kwh, so a 150 kw charger will charge at 450 to 600 miles in an hour. In reality though the charging rate gradually slows down after 10 - 20 minutes due to heat and/or when the car gets to 80 or 90% of full charge.

On my last long trip with my Tesla, I stopped at a highway rest stop with 250kW chargers and plugged in. I saw shocked (not literally) by the 10XX (4 digits!) miles per hour of charge going in initially. It started at 21% and as I was walking away from the car, I saw it climb to 23, 24, 26, 28, 31% before I even entered the building. Then we all went to the bathroom briefly, then waited on the Dunkin line for coffee, and by the time we walked back to the car, it was already over 90% and charging had slowed dramatically at that point. But I only needed less than 80% to complete my trip from there (and end with 20+% at the destination).

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