Audi making shifts… But not manually

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Audi announced today (9/6/18) that beginning with the 2019 line of cars, they are completely killing off the manual options for transmissions. Looking at this decision might cause some car enthusiasts to be upset, but it looks like they are only discontinuing the manual options for the cars sold in the US.

Audi (OTCPK:AUDVF), and also parent company Volkswagen (OTCPK:VLKAY) have been making strides not only in the US market, but are starting to streamline and come after more market share. The manual transmission buster may be a sad day for those who love to feel the gear kick up, but it seems to be boding well for the company.

Electric Audi jumps into the foray with Mercedes and Tesla

Recently announced was the Audi eTron, and a quick peek at the website for the eTron preview shows a very real challenger to Teslas Model X. Sporting some of the same specs as well, the eTron has a 150 kW charging capacity, and gets an 80% charge in about 30 minutes.

Mercedes-Benz can’t be left out of the party either, with their all electric EQC, giving both Tesla and Audi a run for their money. The newly announced EQC comes with the following highlights:

  • Combined power of 22.2 kWh per 100km
  • 400 horsepower
  • 0-60 in 4.9 seconds (still less that a Model X)
  • Electric range of ~200 miles on a full charge (considerably less than Model X’s 279 mile range)

What does this mean for Audi?

With so many players now jumping into the EV market, and Audi making changes to products sold, how would this help or hurt the car maker? Looking at comparable P/E multiples for parent company Volkswagen, they trade their ADR at a significant discount to their peers on a comparable basis. The P/E multiple valuation shows a price target of $57.40, a 79% upside on valuation.

If comparables aren’t your thing, then buckle up for this. Running a 5 YR EBITDA Discounted Cash Flow analysis on the company, we get a price target of $168.47 for 2023. That represents a 426% upside to the last closing price of $32.01.

Looks like they should have killed the manual shift option years ago.

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