Rivian/Volkswagen deal a 'red flag' for auto tech suppliers like Aptiv - analyst

seekingalpha06-26

Shares of Aptiv plc (NYSE:APTV) are on the defensive Wednesday following a downgrade by Piper Sandler to Underweight, driven by concerns over the negative impact of Rivian’s (RIVN) joint venture with ...

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On Tuesday, Rivian (RIVN) received a multi-billion-dollar investment from Volkswagen (VWAGY, VWAPY) to form a joint venture to create next generation electrical architecture and best-in-class software technology. While the news may seem unrelated to Aptiv (APTV), Piper Sandler analyst Alexander Potter sees this as a red flag for Aptiv (APTV).  Potter views the Rivian/Volkswagen JV as a sign of “disintermediation” in the electric vehicle sector. While “old-school” car companies struggle with more fundamental questions about parts and components, new EV companies must configure their own smart vehicle architecture (SVA), design their own onboard computers, and write their own code. Since it is becoming too costly to rely on companies like Aptiv (APTV), the Rivian/Volkswagen JV underscores the shift towards in-source production.  While Aptiv (APTV) is still relevant, the former bull case seems unrealistic. The company’s margin target of 17% hinges on its SVA provided to automakers who cannot develop these platforms in-house. The problem for Aptiv (APTV) is that Tesla (TSLA), Rivian (RIVN), and some Chinese OEMs can develop vehicles more quickly because they control ECUs and software internally. For APTV to maintain a 17% margin, Piper thinks they will have to raise their prices, exacerbating the shift to in-house production.  The recent cancellation of an SVA order (possibly Volkswagen) and with the remaining backlog now at-risk among cost-conscious clients prompts Piper to lower its price target for Aptiv (APTV), shaving 100 basis points from its long-term operating margin, and raising doubts that the company can achieve its targeted growth rate. The firm now has a $63 price target, 14% below Tuesday’s close.  Aptiv (APTV) shares are down nearly 10% to a four-year low. Reverberations through the sector are dragging down shares of BorgWarner (BWA), Lear Corp (LEA), Magna International (MGA), and Forvia SE,","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.2","shortVersion":"4.24.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2446227316"}