Investing

Prediction: This Auto Stock Is a Disaster, but a Perfect Buyout Candidate and Could Make Investors a Small Fortune

Austin Smith

Published: January 17, 2025 8:20 am

24/7 Wall St. Key Points:

• A possible merger between Honda Motor Co. (NYSE: HMC) and Nissan might generate scale to challenge Toyota Motor Corp. (NYSE: TM), which rules the market with over 10 million annual car sales by means of cost savings.
• As they try to reach scale in the expanding EV industry, mid-tier manufacturers like Hyundai, Kia, and Ford Motor Co. (NYSE: F) could find mounting pressure to combine.
• With its weakening U.S. market posture and the possibility for restructuring or acquisition resulting from operational inefficiencies, Stellantis N.V. (NYSE: STLA) offers a speculative M&A prospect.
• Are you on track to retire, or are you behind? Click here to take a free quiz and see for yourself. (sponsored)

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Transcript

[00:00:05] Douglas McIntyre: So one of the things that we’ve seen in the media fairly recently is that Nissan and Honda, be a And what it tells me is that if you’re in the second tranche of big car companies, they’re both they’re not Volkswagen, Toyota, or GM, that you need to look for economies of scale right now because the electric guys are starting to eat your lunch.

[00:00:33] Lee Jackson: Yep.

[00:00:33] Douglas McIntyre: going to get all the market share there. You’ll be lucky if in China you get 2 percent and in the United States you get 5%. So what do you do?

[00:00:43] Lee Jackson: Right.

[00:00:44] Douglas McIntyre: of scale. If those two companies merged, they’ll fire a couple hundred thousand people. At least they bought themselves some earnings for a while,

[00:00:55] Lee Jackson: Well, it’s basically ostensibly now, it’s basically a battle against Toyota because Toyota just dominates them. I think between Nissan and Honda and even Mitsubishi is into this discussion, all three of them. Between those three companies, I think they produced 3 million cars last year or sold 3 million cars.

[00:01:15] Lee Jackson: You know, and Honda’s up at like close to five million, you know, so it’s it’s like uh, they’re so dominating everything that I guess they feel that the best way to participate is to Uh, literally join forces

[00:01:36] Douglas McIntyre: well, and I don’t think this is over,

[00:01:38] Lee Jackson: No

[00:01:39] Douglas McIntyre: is, is you see more and more problems with these gas powered car companies. mean, you know, if you said to me, I think Hyundai Kia sort of not big enough right now. Uh, I don’t know that the Ford family would go through with any sort of a merger, but they’re not big enough. So you’ve still got some car companies that are just below the top tier in terms of unit sales.

[00:02:06] Lee Jackson: Yeah, yeah,

[00:02:07] Douglas McIntyre: are not going to be big in the EV business. You’ve got to give a lot of thought as to whether or not mergers create scale for them.

[00:02:16] Lee Jackson: I have to admit, I, you can probably bet that Honda and Nissan have very similar C suite kind of people, you know, running everything. And, you know, they do almost all of their production here because that’s how they avoid tariffs. And I mean, there’s a big Toyota plant near me and there’s another big Nissan manufacturing plant here in Mississippi.

[00:02:40] Lee Jackson: So, I mean, they’ve got all the, they were smart, you know, they started to get Reproduction over here years ago, but the mere fact that they would consider a merger because Toyota dominates the industry so much, that’s kind of a, I didn’t see that coming. I have to admit.

[00:02:56] Douglas McIntyre: The only stock that I would look at for M&A benefit is Stellantis. There’s, if you said to me, what would, what stock would I buy on an M&A play? now weak enough so that, I mean, they’re fallen into the second tier in terms of manufacturers. They’re not first tier company anymore. So

[00:03:19] Lee Jackson: Right, right.

[00:03:20] Douglas McIntyre: I’m spec, if I’m buying on a speculative M&A basis, I would look at Stellantis.

[00:03:29] Lee Jackson: Well, yeah, I mean, like we discussed ad nauseum, I mean, they’re horribly run. Chrysler’s doomed. I mean, Chrysler’s all but doomed. So they’ll be down to, and again, and one thing I did see, and we’ve had this discussion, but the, the, the Ram. Truck competes. It definitely competes with the F-150 and um, and they have you, you know, there’s probably.

[00:03:54] Lee Jackson: 10 to 15 different F 150 models. You know, there’s the big ranch in Texas model and the F 150 super model. And I mean, there’s so many of them and I think Ram does as well, but I, yeah, I think Stellantis is somebody who eventually. We’ll say, look, you know, we don’t want to deal with this anymore. And, you know, we have horrible set up in the United States and we’re not doing good and we’re basically a European car company.

[00:04:21] Lee Jackson: So yeah, I think you’re right. Stellantis could be in play.

[00:04:24] Douglas McIntyre: Yeah. So anyway, my speculative play in the car industry right now is Stellantis. I, not for the faint of heart, but that’s my tech play.

[00:04:35] Lee Jackson: Yep. I think I don’t think that’s a bad idea at all. And, uh, it’ll be interesting to see how their numbers for the quarter are because some of the other car companies have tossed out some really solid results for the fourth quarter in terms of total sales. So it’ll be interesting to see what the actual reports look like.