May 19, 2022

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10 Auto Companies Facing Worst Declines Amid Global Chip Shortage

In this article, we discuss the 10 auto companies facing the worst declines amid global chip shortage. If you want to skip our detailed analysis of these stocks, go directly to the 5 Auto Companies Facing Worst Declines Amid Global Chip Shortage.

The ongoing semiconductor chip shortage has had a huge impact on the global automobiles industry that uses these chips in the production of vehicles, both traditional and electric. A hit in production and sales due to the chip shortage will likely cost the auto industry $110 billion this year, according to a report by consulting firm AlixPartners. The forecast, up from $60 billion in losses predicted in January this year, was revised after a fire at a major chipmaker in Japan and increased supply chain problems related to semiconductors.

AlixPartners predicts that the global auto sector will produce 3.9 million fewer vehicles this year as a result of the chip crisis. However, IHS Markit, a London-based business intelligence firm, expects that number to be as high as 7 million. US President Joe Biden, who has championed a new plan to jumpstart American manufacturing during his tenure, has earmarked more than $50 billion for US-based chipmakers. He has also ordered a review of US supply chains in order to assess the problems faced by American carmakers in this regard.

Some of the top auto firms facing the worst declines amid the global chip shortage include General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), and Ford Motor Company (NYSE:F), among others discussed in detail below. The chip crisis began during the pandemic when the lockdown protocols led to the closure of some chip manufacturing plants. As the economy reopened at the turn of the year, the increase in demand for chips exacerbated the crisis, pushing prices sky high and affecting supply chains.

The increase in prices of semiconductors has also affected other sectors of the economy, including the finance world. The tech-enabled disruption of the auto industry, which had been proceeding at electric speed, has been hit. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

10 Auto Companies Facing Worst Declines Amid Global Chip Shortage

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Our Methodology

With this context in mind, here is our list of the 10 auto companies facing the worst declines amid global chip shortage. Only those auto companies that have announced either layoffs or sales, delivery, and production cuts because of the chip shortage were selected. The firms that forecast earnings declines because of the shortage were also included.

The list is compiled according to the number of hedge fund holders in each company. Data from the 873 funds tracked by Insider Monkey was used for this purpose.

Special importance was assigned to the basic business fundamentals and analyst ratings for each firm to provide readers with some context so they can make more informed investment choices.

Auto Companies Facing Worst Declines Amid Global Chip Shortage

10. Subaru Corporation (OTC:FUJHY)

Number of Hedge Fund Holders: N/A

Subaru Corporation (OTC:FUJHY) is placed tenth on our list of 10 auto companies facing the worst declines amid global chip shortage. The company makes and sells automobiles and is headquartered in Japan. In January this year, the company said it would cut output by several thousand in the US and Japan due to the chip shortage. The shortage affected the production of cars at the Gunma factory of the firm. Production at the factory was also halted for two days due to the chip crisis, a spokesperson of the firm told news agency Reuters that month.

Subaru Corporation (OTC:FUJHY) has a market cap of $14 billion. It posted a profit of ¥765 million in the previous fiscal year. The revenue over the period was ¥28 billion, down more than 15% year-on-year.

Just like General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), and Ford Motor Company (NYSE:F), Subaru Corporation (OTC:FUJHY) is one of the stocks taking a hit because of the global chip shortage.

9. Mazda Motor Corporation (OTC:MZDAY)

Number of Hedge Fund Holders: N/A

Mazda Motor Corporation (OTC:MZDAY) is ranked ninth on our list of 10 auto companies facing the worst declines amid global chip shortage. The company engages in the manufacture and sale of passenger cars. It is headquartered in Japan. In May, the automaker announced that the chip shortage was expected to affect 100,000 Mazda cars this year. In a statement, the company said it would try to minimize the impact of the crisis to around 70,000 vehicles. The company plans to fully leverage available inventory for the purpose.

Mazda Motor Corporation (OTC:MZDAY) has a market cap of over $5 billion. The company was founded in 1920 and employs close to 50,000 people. Some of the products it sells include four-wheeled vehicles, gasoline and diesel engines, as well as transmissions.

Along with General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), and Ford Motor Company (NYSE:F), Mazda Motor Corporation (OTC:MZDAY) is one of the firms affected by the global chip shortage.

8. Canoo Inc. (NASDAQ:GOEV)

Number of Hedge Fund Holders: 16

Canoo Inc. (NASDAQ:GOEV) is a California-based company that makes and sells consumer and commercial electric vehicles. It is placed eighth on our list of 10 auto companies facing the worst declines amid global chip shortage. At the end of July, the chief technology officer of Canoo, Peter Savagian, told news publication Business Insider that the company had the chip shortage on the radar and was actively positioning itself to avoid the possible impact it would have on the production of EVs.

On September 7, investment advisory HC Wainwright initiated coverage of Canoo Inc. (NASDAQ:GOEV) stock with a Buy rating and a price target of $15, noting the firm was well positioned to take advantage of the growing electric vehicle market.

At the end of the second quarter of 2021, 16 hedge funds in the database of Insider Monkey held stakes worth $37 million in Canoo Inc. (NASDAQ:GOEV), the same as in the previous quarter worth $14 million.

In addition to General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), and Ford Motor Company (NYSE:F), Canoo Inc. (NASDAQ:GOEV) is one of the companies facing a production decline amid a global chip shortage.

7. Fisker Inc. (NYSE:FSR)

Number of Hedge Fund Holders: 16

Fisker Inc. (NYSE:FSR) is a California-based firm that designs, manufactures, and markets electric vehicles. It is ranked seventh on our list of 10 auto companies facing the worst declines amid global chip shortage. The stock has plunged in value by 29% over the past three months as the chip shortage hits the industry. Fisker recently priced an upsized $625M green convertible notes offering. The company has also inked an agreement with Magna International as it plans the production of new models.

On August 9, investment advisory Morgan Stanley resumed coverage of Fisker Inc. (NYSE:FSR) stock with an Overweight rating and a price target of $40, terming the firm the “highest rated de-SPAC” startup in the EV space.

At the end of the second quarter of 2021, 16 hedge funds in the database of Insider Monkey held stakes worth $256 million in Fisker Inc. (NYSE:FSR), down from 22 the preceding quarter worth $337 million.

General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), and Ford Motor Company (NYSE:F) are some of the automakers affected by a chip shortage worldwide, along with Fisker Inc. (NYSE:FSR).

6. Li Auto Inc. (NASDAQ:LI)

Number of Hedge Fund Holders: 20

Li Auto Inc. (NASDAQ:LI) is placed sixth on our list of 10 auto companies facing the worst declines amid global chip shortage. The firm makes and sells smart sports utility vehicles and is headquartered in China. The stock has plunged in value by over 7% since the beginning of this week after the firm announced that it would be cutting down guidance for the third quarter deliveries to 24,500 from around 26,000 due to the chip shortage crisis. This correction means the company expects to deliver 6,500 vehicles in September, down 30% month-on-month.

On August 31, investment advisory Bank of America maintained a Buy rating on Li Auto Inc. (NASDAQ:LI) stock and raised the price target to $42 from $39, appreciating the second quarter earnings results of the company and the third quarter guidance.

At the end of the second quarter of 2021, 20 hedge funds in the database of Insider Monkey held stakes worth $457 million in Li Auto Inc. (NASDAQ:LI), up from 18 in the previous quarter worth $493 million.

General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), and Ford Motor Company (NYSE:F) have all reported production hiccups because of a chip shortage, just like Li Auto Inc. (NASDAQ:LI).

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Disclosure. None. 10 Auto Companies Facing Worst Declines Amid Global Chip Shortage is originally published on Insider Monkey.