What You Missed This Week in EVs and Clean Energy

Tesla shareholders vote to reinstate Elon Musk's $56B pay package

Institutional investors and professional traders rely on The Fly to keep up-to-the-second on breaking news in the electric vehicle and clean energy space, as well as which stocks in these sectors that the best analysts on Wall Street are saying to buy and sell.

From the hotly-debated high-flier Tesla (TSLA), Wall Street's newest darling Rivian (RIVN), traditional-stalwarts turned EV-upstarts GM (GM) and Ford (F) to the numerous SPAC-deal makers that have come public in this red-hot space, The Fly has you covered with “Charged,” a weekly recap of the top stories and expert calls in the sector.

VOTE: 

Tesla shareholders voted to ratify CEO Elon Musk's $56B 2018 pay plan, five months after a judge ordered the company to rescind the package, finding it had been improperly granted by the board, CNBC's Lora Kolodny reported. The vote does not override the court's ruling, but provides a PR victory for Elon Musk that could help his effort to sway a court to give him his performance options in the future, Kolodny added.

Bernstein says Tesla shareholders' vote to approve Elon Musk's pay package, while still likely to face legal challenges, is a positive endorsement for the CEO and a “relief” for Tesla shareholders. The vote appears to have been swung by Blackrock and Vanguard's decision to break with proxy advisor recommendations and vote in favor, the firm tells investors in a research note. Bernstein says the shareholder meeting “was unusually (and at times uncomfortably) promotional, even by Tesla's standards.” It points out that Musk stated that ARK's $5 trillion valuation for Tesla autonomy was “pretty accurate,” and that the Optimus robot business could be worth $20 trillion.

Musk acknowledged that electric vehicle growth was weak, but reiterated his view that Tesla would grow this year. The firm thinks unit growth in fiscal 2024 is unlikely, without material price discounts and significant pressure on free cash flow, however. Bernstein keeps an Underperform rating on Tesla.

Meanwhile, Goldman Sachs kept a Neutral rating on Tesla after shareholder proposals to re-approve Elon Musk's 2018 performance award and to reincorporate in Texas both passed. The vote will help to reduce “key person risk” in the near-term, which is consistent with the move in shares on Thursday, the firm tells investors in a research note. Moreover, Goldman believes investors will expect key artificial intelligence-related projects to be a focus at Tesla, and these are an important part of the stock's valuation multiple.

The firm points out that Tesla showed a slide implying three future new vehicles, which one likely to be a robotaxi given the company's past commentary. Meanwhile, the Biden administration last month proposed tariff increases under Section 301 on China-made electric vehicles to 102.5% from 27.5%, which could pressure Tesla's margins, it contends.

Also commenting on the news, Wedbush says this is “a pop the champagne moment for Musk and Tesla shareholders.” This removes a $20-$25 overhang on the stock, in the firm's opinion, that has weighed on shares since “the head scratching Delaware ruling set this Twilight Zone soap opera on earlier this year.” Wedbush has an Outperform rating on the shares.

RECALL: 

Tesla is recalling 5,836 vehicles in China due to seating malfunctions, Bloomberg reports, citing a statement from the government regulator. The recall covers imported Model 3, Model S, and Model X electric vehicles produced between January 2019 and April 2024, according to the report, which adds that a seatbelt warning system that fails to alert occupants can increase the risk of injury during a crash.

Click here to check out Tesla's recent Media Buzz Sentiment as measured by TipRanks.

TARIFFS: 

The European Commission will impose extra duties of up to 38.1% on imported Chinese electric cars beginning in July, Reuters' Philip Blenkinsop reports. Less than a month after the U.S. quadrupled tariffs for Chinese EVs to 100%, the EU said it will impose additional duties of 17.4% for BYD, 20% for Geely, and 38.1% for SAIC on top of the existing 10%, over what it said were excessive subsidies, Blenkinsop writes.

ON THE SIDELINES: 

JPMorgan initiated coverage of Li Auto (LI) with a Neutral rating. The firm believes the current share price largely reflects the upside potential as well as volume/margin headwinds in the next 6-9 months. Li targets China's fast-growing and relatively untapped premium EREV segment through its competitive SUV line-ups tailored for family users. However, its recent product portfolio extension into BEV brings challenges given the inherent intense competition in the BEV market, JPMorgan argues. That said, the firm forecasts superior volume growth versus the BEV market as it expects EREV + PHEV will continue to see faster growth. JPMorgan looks for a better entry point to buy Li.

UPSIDE POTENTIAL: 

BofA notes that in addition to General Motors' increased buyback and dividend, CFO Paul Jacobson presented at a conference and said GM expects Q2 earnings to be “better” than Q1, which the firm says is “directionally consistent with our model” and “suggests there could even be upside.” GM also now expects 2024 EV production to be 200,000-250,000, or the lower end of its prior guidance for 200,000-300,000, said it continues to believe it can achieve positive variable profit this year, and separately announced plants to inject $850M in cash into Cruise, BofA tells investors. The firm, which believes “there is a long way in front of the company to drive more possible upside and the potential to make tough strategic decisions,” maintains a Buy on GM shares.

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Originally Posted June 2024 – What You Missed This Week in EVs and Clean Energy