A vehicle often derided as a “mommy mobile” might save Fiat Chrysler (NYSE: FCAU) from oblivion. That vehicle is the Chrysler Pacifica minivan and soccer moms are not the ones who will propel its’ success.
Instead it is rideshare drivers; those hardworking immigrants and unemployed factory workers who make their living through Uber and Lyft that will make Pacifica a hit. As I noted last year the Pacifica seems designed for ridesharing. Some of its basic features include:
- A powered gate (backdoor) to make for easy loading and unloading luggage.
- Three rows of seating.
- 260.3 square feet of cargo space.
- An optional plug-in Hybrid power train that can get up to 84 miles per gallon in all electric mode.
- A $7,500 federal tax credit for those who buy the hybrid version.
- A 3.6 V-6 gasoline engine and two electric motors.
- Screens mounted on the back of the front seats to entertain passengers.
- A sleek stylish Italian inspired look that seems more at home on a city street than sitting in a suburban driveway.
What’s more I’ve recently seen some ads about “Chrysler Pacifica at work” popping up on my computer screen during web searches. It is obvious who the workers that Chrysler is going after; Lyft and Uber drivers.
That market is potentially vast, Lyft alone is in 61 cities in the United States alone, Rideshareapps reported. One company Uber has 14,088 vehicles just in New York City. Competition for drivers is also intense; Lyft was offering a $500 signup bonus in Denver in July 2017.
If that was not enough Uber offers an Xchange Leasing program to help its drivers buy cars. Chrysler is not in the program yet, but it’d make a lot of sense for the company to join it.
Will Waymo Save Fiat Chrysler?
Lyft and Uber is not the only opportunities that Fiat Chrysler is pursuing. It, Avis-Budget (NYSE: CAR), and Alphabet (NASDAQ: GOOG) are testing self-driving Pacifica’s in a rideshare experiment in Phoenix.
The effort is only the latest joint venture between Fiat Chrysler and Waymo; Alphabet’s (NASDAQ: GOOGL) autonomous vehicle unicorn, that utilizes the Pacifica to test self-driving vehicle technology. Waymo engineers have been experimenting with self-driving Pacificas at a Chrysler facility in Michigan for some time.
The next obvious use of this tech will be to develop other vans that use it. Obvious choices would be the Ram Citymaster Pro and Promaster Cargo, (Fiat Ducato jn Europe) vans. If Chrysler would become the first to deploy a self-driving work van it would dominate the market. Obvious customers would be delivery services, GrubHub (NYSE: GRUB) drivers, Uber and Lyft drivers doing delivery, Google Express and delivery drivers for retailers such as Amazon (NASDAQ: AMZN), Kroger (NYSE: KR) and Walmart (NYSE: WMT).
Even the US Postal Service; which is using Dodge vans for delivery is a potential customer. Beyond that there is the potential of the Dodge Grand Caravan which is already a popular taxicab. One use would be to try and deploy it as a police car or government fleet vehicle.
Minivan sales have exploded in recent years. During 2015 and 2016 sales of the Grand Caravan grew by 94% and the Chrysler Town & Country (Pacifica’s predecessor) grew by 42%, Seeking Alpha contributor Anton Wahlman noted last year. Such growth is likely to explode if self-driving cars succeed and rideshare and demand for delivery services increases.
Is Fiat Chrysler a Value Investment?
All this makes Fiat Chrysler a great potential growth investment in the auto industry but is it a value investment? I would say yes because Fiat Chrysler is definitely underpriced.
This is a company that was trading at $11.11 a share on July 7, 2017; yet it reported $123.05 billion in revenues on March 31, 2017. That gave the company a $21.262 billion market capitalization on July 7, 2017.
Some of the other numbers that shareholders get for investing $11.11 a share in Chrysler are pretty good too. They include:
- A net income of $2.153 billion on March 31, 2017.
- Assets of $109.4 billion on March 31, 2017.
- Cash and short term investments of $15.57 billion on March 31, 2017.
- $12.56 billion in cash from operations on March 31, 2017.
- An enterprise value of $28.75 billion on July 7, 2017.
- A return on equity of 11.06% on March 31, 2017.
There were a few bad things about Fiat Chrysler including a “free cash flow” of -$696.69 million on March 31, 2017 and no dividend. Yet I think the low price makes up for those defects.
If you are looking for a low cost auto play Fiat Chrysler is well worth a look. It is well poised to take advantage of coming trends in the auto industry with Pacifica and its’ relationship with Waymo has vast potential to add value. Some observers have estimated Waymo’s valuation at $70 billion (about the same as Uber before Travis Kalanick’s fall from power).
Fiat Chrysler is a value investment for today and tomorrow thanks to Pacifica. That value might grow if rumors of a Volkswagen buyout come true.