(Bloomberg) — At a factory near Germany’s border with the Czech Republic, Volkswagen AG’s ambitious strategy to become the global leader in electric vehicles is coming up against the reality of manufacturing during a pandemic.The Zwickau assembly lines, which produce the soon-to-be released ID.3 electric hatchback, are the centerpiece of a plan by the world’s biggest automaker to spend 33 billion euros ($36 billion) by 2024 developing and building EVs. At the site, where an East German automaker built the diminutive Trabant during the Cold War, VW eventually wants to churn out as many as 330,000 cars annually. That would make Zwickau one of Europe’s largest electric-car factories—and help the company overtake Tesla Inc. in selling next-generation vehicles.But Covid-19 is putting VW’s and other automakers’ electric ambitions at risk. The economic crisis triggered by the pandemic has pushed the auto industry, among others, to near-collapse, emptying showrooms and shutting factories. As job losses mount, big-ticket purchases are firmly out of reach—in the U.S., where Tesla is cutting prices, more than 36 million people have filed for unemployment since mid-March. Also, the plunge in oil prices is making gasoline-powered vehicles more attractive, and some cash-strapped governments are less able to offer subsidies to promote new technologies.Even before the crisis, automakers had to contend with an extended downturn in China, the world’s biggest auto market, where about half of all passenger EVs are sold. Total auto sales in China declined the past two years amid a slowing economy, escalating trade tensions, and stricter emission regulations. EV sales are forecast to fall to 932,000 this year, down 14% from 2019, according to BloombergNEF. The drop-off is expected to stretch into a third year as China's leaders have abandoned their traditional practice of setting an annual target for economic growth, citing uncertainties. Economists surveyed by Bloomberg expect just 1.8% GDP growth this year.The global market contraction raises the prospect of casualties. French finance minister Bruno Le Maire has warned that Renault SA, an early adopter of electric cars with models like the Zoe, could “disappear” without state aid. Even Toyota Motor Corp., a hybrid pioneer when it first introduced the Prius hatchback in 1997, is under pressure. The Japanese manufacturer expects profits to tumble to the lowest level in almost a decade.Automakers who for years have invested heavily in a shift to a high-tech future—including autonomous vehicles and other alternative energy-based forms of transportation such as hydrogen—now face a grim test. Do their pre-pandemic plans to build and sell electric cars at a profit have any chance of succeeding in a vastly changed economic climate? Even as Covid-19 has obliterated demand, for the car makers most committed to electric, there’s no turning back.“We all have a historic task to accomplish,” Thomas Ulbrich, who runs Volkswagen’s EV business, said when assembly lines restarted on April 23, “to protect the health of our employees—and at the same time get business back on track responsibly.”Volkswagen Pushes AheadGlobal EV sales will shrink this year, falling 18% to about 1.7 million units, according to BloombergNEF, although they’re likely to return to growth over the next four years, topping 6.9 million by 2024. “The general trend toward electric vehicles is set to continue, but the economic conditions of the next two to three years will be tough,” said Marcus Berret, managing director at consultancy Roland Berger.Volkswagen’s Zwickau facility became the first auto plant in Germany to resume production after a nationwide lockdown started in March. Before restarting, the company crafted a detailed list of about 100 safety measures for employees, requiring them to, among other things, wear masks and protective gear if they can’t adhere to social-distancing rules.The cautious approach has reduced capacity—50 cars per day initially rolled off the Zwickau assembly line, roughly a third of what the plant manufactured before the coronavirus crisis. (VW said Wednesday that daily output had risen to 150 vehicles, with a plan to reach 225 next month.) Persistent software problems also have plagued development of the ID.3, one of 70 new electric models VW group is looking to bring to market in the coming years. Still, Ulbrich and VW CEO Herbert Diess over the past three months have reaffirmed Volkswagen’s commitment to electrification. “My new working week starts together with Thomas Ulbrich at the wheel of a Volkswagen ID.3 – our most important project to meet the European CO2-targets in 2020 and 2021,” Diess wrote in a post on LinkedIn in April. “We are fighting hard to keep our timeline for the launches to come.”Diess has described the ID.3 as “an electric car for the people that will move electric mobility from niche to mainstream.” Pre-Covid, the company had anticipated that 2020 would be the year it would prove its massive investments and years of planning for electric and hybrid models would start to pay off.A more pressing worry that could hamper VW’s ability to scale up production is its existing inventory of unsold vehicles. The cars need to move to make room for new releases, but sales are down as consumers are tightening their spending. One response has been to offer improved financing in Germany, including optional rate protection should buyers lose their jobs. VW also has adopted new sales strategies first used by its Chinese operations, such as delivering disinfected cars to customer homes for test drives, and expanding online commerce.Other German automakers are similarly pushing ahead with EV plans. Daimler AG is sticking to a plan to flank an electric SUV with a battery-powered van and a compact later this year. BMW AG plans to introduce the SUV-size iNEXT in 2021 as well as the i4, a sedan seeking to challenge Tesla’s best-selling Model 3.A potential obstacle for all these companies—apart from still patchy charging infrastructure in many markets—is the availability of batteries. Supply bottlenecks appear inevitable given that the number of electric car projects across the industry outstrip global battery production capacity. And boosting cell manufacturing is a complicated task.China's (Weakened) EV Dominance For VW and others, the first big test of EVs’ appeal in a Covid-19 world will come in China. Diess has referred to China as “the engine of success for Volkswagen AG.” VW group deliveries returned to growth year-on-year last month in China, while all other major markets declined.Not long ago, China appeared to be leading the world toward an electric future. As part of President Xi Jinping’s goal to make the country an industrial superpower by 2025, the government implemented policies that would boost sales of EVs and help domestic automakers become globally competitive, not just in electric passenger cars but buses, too.With the outbreak seemingly under control in much of the country, China is seeing some buyers return to the showrooms, but demand for passenger cars is likely to fall for the third year in a row, putting startups like NIO Inc. at risk and hurting more-established players like Warren Buffett-backed BYD Co., which suffered from a 40% year-on-year vehicle sales decline in the first four months of 2020.The Chinese auto market may shrink as much as 25% this year, according to the China Association of Automobile Manufacturers, which before the pandemic had been expecting a 2% decline. EV sales fell by more than one-third in the second half of 2019.NIO, the Shanghai-based startup that raised about $1 billion from a New York Stock Exchange initial public offering in 2018 but lost more than 11 billion yuan ($1.5 billion) last year, was thrown a much-needed lifeline when a group of investors, including a local government in China’s Anhui Province, offered 7 billion yuan last month.Other Chinese manufacturers are counting on support from the government, too, including tax breaks and an extension to 2022 of subsidies, originally scheduled to end this year, to make EVs more affordable.For now, the government will also look to help makers of internal combustion engine vehicles, at least during the worst of the crisis, said Jing Yang, director of corporate research in Shanghai with Fitch Ratings. But, she said, “over the medium-to-long term, the focus will still be on the EV side.”America is Tesla CountryCompanies can’t count on that same level of support from President Donald Trump in the U.S., where consumers who love their SUVs and pickup trucks have largely steered clear of electric vehicles other than Tesla’s.The U.S. lags China and Europe in promoting the production and sale of EVs, and that gap may widen now that Americans can buy gas for less than $2 a gallon.“When you’re digging out of this crisis, you’re not going to try to do that with unprofitable and low-volume products, which are EVs,” said Kevin Tynan, a senior analyst with Bloomberg Intelligence.Weeks after announcing plans to launch EVs for each of its brands, General Motors Co. delayed the unveiling of the Cadillac Lyriq EV originally planned for April. Then on April 29, the company said it would put off the scheduled May introduction of a new Hummer EV. The models are part of CEO Mary Barra’s strategy to spend $20 billion on electrification and autonomous driving by 2025, to try to close the gap with Tesla.In another move aimed at winning over Tesla buyers, Ford Motor Co. unveiled its electric Mustang Mach-E last November at a splashy event ahead of the Los Angeles Auto Show. The highly anticipated model had been scheduled to debut this year. Ford has not officially postponed the release, but the company has said all launches will be delayed by about two months, potentially pushing the Mach-E into 2021.Elon Musk, whose cars dominate the U.S. electric market, cut prices by thousands of dollars overnight. The Model 3 is now $2,000 cheaper, starting at $37,990. The Model S and Model X each dropped $5,000.Musk engaged in a high-profile fight with California officials this month over Tesla’s factory in Fremont, California, which had been closed by shutdown orders Musk slammed as “fascist.” In a May 11 tweet, he said the company was reopening the plant in defiance of county policy. On May 16, Tesla told employees it had received official approval.During most of the shutdown in California, the company managed to keep producing some cars thanks to better relations with local officials regulating its other factory, in Shanghai. That plant closed as the virus spread from Wuhan in late January, but the local government helped it reopen a few weeks later in early February.First Zwickau, Then the WorldThe ID.3’s new electric underpinning, dubbed MEB, is key to VW’s strategy to sell battery-powered cars on a global scale at prices that will be competitive with similar combustion-engine vehicles. Automakers typically rely on such platforms to achieve economies of scale and, ultimately, profits. MEB will be applied to purely electric vehicles across all of the company’s mass-market brands, including Skoda and Seat.VW said it spent $7 billion developing MEB after Ford last year agreed to use the technology for one of its European models. Separately, the group’s Audi and Porsche brands are built on a dedicated EV platform for luxury cars that the company says will be vital in narrowing the gap with Tesla.VW plans to escalate its electric-car push by adding two factories, near Shanghai and Shenzhen, that it says could eventually roll out 600,000 cars annually, more cars than Tesla delivered globally last year.While China is the initial goal, making a dent in Europe and the U.S. is the long-term one. Like China, Europe had been tightening emissions regulations significantly before the pandemic. New rules to reduce fleet emissions will gradually start to take effect this year, effectively forcing most manufacturers to sell plug-in hybrids and purely electric cars to avoid steep fines.Because of the mandates, Europe’s commitment to electrification isn’t going away, said Aakash Arora, a managing director with Boston Consulting Group. “In the long term, we don’t see any relaxation in regulation,” he said.For VW, this crisis wouldn’t be the first time it started a new chapter in difficult times. Diess saw an opportunity coming off the manufacturer’s years-long diesel emissions scandal that cost the company more than $33 billion to win approval for the industry’s most aggressive push into EVs. When VW unveiled the ID.3, officials compared its historic role to the iconic Beetle and the Golf, not knowing that this might hold in unintended ways: The Beetle arose from the ashes of World War II, and the Golf was greeted by the oil-price shock in the 1970s.“We have a clear commitment to become CO2 neutral by 2050,” VW strategy chief Michael Jost said, “and there is no alternative to our electric-car strategy to achieve this.”(Updates with Tesla price cut starting in the third paragraph. An earlier version corrected the spelling of Berret in the ninth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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Yahoo Finance’s Brian Sozzi, Alexis Christoforous, and Rick Newman discuss President Trump’s latest moves after Twitter fact checked the claims in his tweets.The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. […]
Gilead Sciences (GILD) and Arcus Biosciences (RCUS), an oncology-focused biopharma, have announced a 10-year partnership to co-develop and co-commercialize current and future therapeutic product candidates in Arcus’s pipeline.The agreement will also provide ongoing funding to support Arcus’s research and development programs. On the news GILD shares stayed flat in Wednesday’s pre-market, while RCUS dropped 15%.“We are very pleased to build on Gilead’s growing presence in immuno-oncology,” said Daniel O’Day, CEO of Gilead. “By gaining access to its broad, diverse pipeline and Arcus’s clear strengths in discovery and development, we believe that our partnership with Arcus will significantly accelerate our progress in developing transformative new therapies for cancer.”Upon closing, Arcus will receive a $175M upfront payment and a $200M equity investment from Gilead. Arcus is also eligible to receive up to $1.225B in opt-in and milestone payments. This includes immediate rights to zimberelimab, as well as the right to opt-in to Arcus clinical candidates, upon payment of an opt-in fee ranging from $150M to $275M.If Gilead opts-in to the program for the investigational anti-TIGIT monoclonal antibody AB154, Arcus can receive up to $500M in future U.S. regulatory approval milestones.Gilead will obtain exclusive rights to commercialize any programs outside of the US, for which it will pay tiered royalties from high-teens to low twenties. Gilead will also provide up to $400M in ongoing research and development support over the collaboration term, and can appoint two directors to Arcus’s board.The $200M equity investment will be priced at $33.54 per share. Gilead will also have the right to purchase additional shares from Arcus, up to 35% over the next five years, at a 20% premium at the time the option is exercised, or, if greater, the initial purchase price per share.The transaction is expected to close in the third quarter of 2020.Shares in GILD are up 13% year-to-date, and analysts have a cautious outlook on the stock. The Hold analyst consensus is made up of 8 recent buy ratings vs 16 hold ratings and 4 sell ratings, while the $79 average price target indicates 8% upside potential lies ahead. (See Gilead stock analysis on TipRanks)Related News: Gilead and Galapagos Score Positive Topline Results For Ulcerative Colitis Trial Regeneron, Sanofi Get FDA Nod For Dupixent Treatment In Children AstraZeneca-Merck Lynparza Prostate Cancer Treatment Gets FDA Approval More recent articles from Smarter Analyst: * Papa John’s U.S. Pizza Sales Jump 33.5%; Shares Pop 7% In Pre-Market * WalMart Shutters Jet.Com 4 Years After Purchase * Domino’s Pizza Delivers Strong US Sales; Top Analyst Boosts Estimates * Walmart Partners With ThredUp To Enter Fashion Resale Market
Shares in Tractor Supply (TSCO) surged 9% in Tuesday’s after-hours trading, after the company pre-announced surprisingly impressive Q2 trends, featuring +24-29% sales growth and +20-25% comparable store sales growth.“Our outlook for record-breaking sales and earnings in the second quarter demonstrates the potential for Tractor Supply to emerge stronger than before as we continue to gain market share and build our business for the future,” said Hal Lawton, Tractor Supply’s CEO.Notably, TSCO’s e-commerce business has experienced substantial growth quarter-to-date with many customers choosing Buy Online, Pickup At Store and the new contactless curbside delivery option, the company stated.And while there is still a significant portion of the second quarter ahead, Tractor Supply is now forecasting net sales growth of 24% to 29% and comparable store sales growth of 20% to 25%.Building on first quarter momentum, the company’s gross profit performance continues to be strong with gross margin expansion anticipated for the second quarter.“For the second quarter, the net incremental operating expenses related to the COVID-19 pandemic are estimated to be at the high end of the Company’s previous guidance range of $30 million to $50 million” Tractor Supply said, with diluted earnings per share forecast at $2.45 to $2.65.Following the news Wells Fargo analyst Zachary Fadem exclaimed “Holy cow… reason to believe comps could be even better.” He continued: “Considering the timing of today’s release, we believe sales likely accelerated throughout the month of May, and with all of June remaining in Q2, we believe comps could be tracking even higher today (+30%).”In a category comprised of many sub-scale players, he sees TSCO as increasingly advantaged, and clearly benefitting from robust category demand (lawn/garden, pet, etc.), Omnichannel investments and its recently launched national ad campaign.“While we can’t help but think about next year’s tough compare, we continue to view TSCO a core holding in today’s market, favoring its staples-like offerings, high quality execution, and ample long-term comp drivers” he concluded. As a result, Fadem ramped up his price target to $130 from $105 previously.Similarly, Oppenheimer’s Brian Nagel boosted his price target from $110 to $135 on the news, while Baird’s price target rose to $130 from $115 previously. Overall the stock scores a Moderate Buy analyst consensus rating and $107 average analyst price target. Shares are currently trading up 19% on a year-to-date basis. (See Tractor Supply stock analysis on TipRanks).Related News: Autodesk Earnings: Here’s What To Expect Today Tilray To Shut Ontario Cannabis Greenhouse In Money-Saving Move Uber In Partnership With MoneyGram For Driver Discount During Pandemic More recent articles from Smarter Analyst: * Domino’s Pizza Delivers Strong US Sales; Top Analyst Boosts Estimates * Walmart Partners With ThredUp To Enter Fashion Resale Market * Regeneron, Sanofi Get FDA Nod For Dupixent Treatment In Children * Six Flags Set to Partially Reopen in June, Stock Jumps on News
Regeneron Pharma (REGN) has now announced the pricing of the underwritten public secondary offering of 11,831,496 shares of its common stock held by French drugmaker Sanofi at a price of $515 per share.Regeneron has also agreed to purchase 9,806,805 shares directly from Sanofi, at a price of $509.85 per share (representing the price paid by the underwriters in the offering), for an aggregate purchase amount of $5 billion.In connection with the offering, the underwriters have a 30-day option to purchase up to an additional 1,183,150 Regeneron shares from Sanofi, the statement revealed. If the underwriters fully exercise their option to purchase additional shares, following the offering and share repurchase by Regeneron, Sanofi will have disposed of all of its shares, other than 400,000 shares it intends to retain.Regeneron will not receive any of the proceeds from the sale of shares in this offering, the company said. The offering will occur simultaneously in the United States and internationally through underwriters led by BofA Securities and Goldman Sachs as joint book-running managers.Shares in the biotech giant are currently trading at $545, after surging 45% year-to-date as investors grow more confident in its experimental antibody cocktail for Covid-19. “Progress on the development of a COVID-19 antibody cocktail remains on track – and a source of substantial investor interest” notes JP Morgan analyst Cory Kasimov.He has a hold rating on the stock and low $429 price target, writing that “Although we admittedly missed a great opportunity in REGN (shares up 50%+ YTD), we are finding it difficult to pull additional levers in our DCF model based on available data.”Overall, REGN shows a cautiously optimistic Moderate Buy analyst consensus, with a $559 average price target indicating 2.5% upside potential in the coming 12 months. (See Regeneron stock analysis on TipRanks).Related News: Gilead’s Remdesivir Most ‘Beneficial’ In Covid-19 Patients Who Need Extra Oxygen, Study Shows Gilead and Galapagos Score Positive Topline Results For Ulcerative Colitis Trial Regeneron To Repurchase $5 Billion Stake From Sanofi More recent articles from Smarter Analyst: * Regeneron, Sanofi Get FDA Nod For Dupixent Treatment In Children * Six Flags Set to Partially Reopen in June, Stock Jumps on News * Tesla Is Said to Cut Car Prices In North America, China To Jumpstart Demand * Jamie Dimon Likes JPMorgan at Current Levels – and Investors Pounce
Asked at a financial services conference on Tuesday morning about JPMorgan Chase's (JPM) valuation, CEO Jamie Dimon answered that it was “very valuable” at its current price. That was all investors needed to hear, as shares in the nation's largest bank rocketed up by as much as 9% during Tuesday's trading, closing up 7% for the day at $95.82.Dimon's words carry weight among investors, as he famously bought $26 million in JPMorgan shares in February 2016 – a much-publicized and prescient move at what later proved to be a market trough.“I’m not trying to predict the bottom,” Dimon said yesterday, adding that “you cannot be a bank and be immune to what goes on in the world out there.” JPMorgan has previously said that its 2020 earnings will be impaired, as it expects significant loan defaults throughout the year.Dimon remarked that he is hopeful that the rest of the year will see improving fundamentals. “I give it some pretty good odds,” Dimon said. “The government has been very responsive, the Federal Reserve has been very responsive. Large companies have a huge wherewithal, hopefully we’ll keep the small ones alive long enough that most of them get back into business.”Dimon added that the Federal Reserve’s actions to prop up financial markets were like “water that fills every crevice.”Recent analyst reports have been bullish on JPMorgan. In one released last week, Susan Roth Katzke from Credit Suisse maintained a Buy rating on JPMorgan Chase & Co., with a price target of $122, even as she noted that low interest rates and an expected increase in credit losses will weigh on JPMorgan’s earnings this year and next. Overall, the Moderate Buy analyst consensus and 12-month analyst price target of $110 represents 15% upside from JPMorgan's current level. (See JPMorgan Chase & Co. stock analysis on TipRanks).Related News: Autodesk Earnings: Here’s What To Expect Today Google, Apple Roll Out Coronavirus Contact Tracing Technology Why Aurora Cannabis (ACB) Stock Looks Attractive More recent articles from Smarter Analyst: * Six Flags Set to Partially Reopen in June, Stock Jumps on News * Regeneron Announces Secondary Offering Pricing At $515/Share * Tesla Is Said to Cut Car Prices In North America, China To Jumpstart Demand * ‘Holy Cow’ Exclaims Analyst On Tractor Supply’s Record Guidance; Shares Surge 9%