The Zacks Analyst Blog Highlights: Toyota, Tesla, General Motors, Ford and Stellantis
For Immediate Release
Chicago, IL – October 6, 2021 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Toyota Motor Corporation TM, Tesla, Inc. TSLA, General Motors Company GM, Ford Motor Company F and Stellantis N.V. STLA.
Here are highlights from Tuesday’s Analyst Blog:
Chip Crisis Deals a Massive Blow to Q3 Auto Sales
U.S. vehicle sales were off to a solid start this year, strongly rebounding from the pandemic-induced sluggish demand and sales but failed to maintain momentum amid growing chip shortage and dearth of inventories, as was expected. The microchip famine caused a major supply-demand imbalance, with automakers forced to idle production lines across the world. Although buyers’ appetite for personal vehicles is only picking up by the day, the auto industry is unable to meet the mounting demand.
U.S. auto sales fell for the fifth consecutive month in September, driving down third-quarter 2021 total vehicle sales. All the major auto giants reported huge sales declines for September, with just a few including Toyota, Mazda and Volvo managing to post higher year-over-year third-quarter sales.
Then of course, Tesla — which doesn’t provide regional sales data — delivered an impressive quarterly performance. It sold record-breaking 241,300 electric vehicles worldwide, blowing past expectations. But for other legacy automakers like General Motors, Ford, Stellantis among others, it was a rather dull quarter.
According to Edmunds.com, September was the worst sales month so far this year, with automakers selling just over 1 million vehicles. Per Cox Automotive, September auto sales were off roughly 26% year over year, among the weakest volumes in the past decade. Total third-quarter 2021 sales in the United States were down roughly 14% and 22% from the corresponding periods of 2020 and 2019, respectively.
Seasonally adjusted annual rate (SAAR) for September is estimated to be 12.1 million light vehicle units, down from 13.09 million in August and 16.3 million in the year-ago period. This marks the lowest SAAR reading in 2021 so far, after a high of 18.5 million in April.
Q3 Sales Numbers of Auto Bigwigs
U.S. auto giant General Motors took a nasty hit during the quarter under review amid supply constraints and historically low inventories. Sales plummeted 33% year over year to 446,997 vehicles. Per U.S. Automotive News, this marks the company's lowest three-month tally since its 2009 bankruptcy.
The sales decline, however, should not come as a surprise as the firm had already warned investors that its second half 2021 wholesale volumes in North America would decline nearly 200,000 units from the first half of the year. General Motors saw double-digit percentage declines across all major brands including Chevrolet (36.1%), GMC (26.7%), Buick (20.1%) and Cadillac (31.7%).
Close peer Ford reported third-quarter sales of nearly 400,000 vehicles, slumping 27% year over year. While sales of the namesake brand sank 26.7%, Lincoln brand vehicle sales dropped to 17,038 units from the prior-year quarter’s 27,554 units.
The company, which continues to report monthly sales, witnessed a 17.7% year-over-year fall in volumes for September, primarily due to a 22.6% decline in truck sales.Ford currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stellantis sold 410,917 vehicles, which contracted 19% year over year. Deliveries of popular brands namely Jeep, RAM, Chrysler, Dodge, Fiat, and Alfa Romeo slid 11%, 17%, 51%, 32%, 64%, and 10%, respectively, on a year-over-year basis.
Meanwhile, Japan-based auto biggie Toyota saw a rise in third-quarter sales by 1.4% from the corresponding period of 2020 to 566,005 vehicles. Sales for the namesake and Lexus division grew 0.4% and 7.7% year over year, respectively. Nonetheless, Toyota’s sales for the month of September totaled 152,916 vehicles, tanking 22.4% year over year.
Close peer Honda’s sales totaled 345,914 units, shrinking around 11% from the third quarter of 2020, with the firm’s namesake and Acura brands witnessing year-over-year drop of 2.8% and 11.9%, respectively. Sales decline worsened in September, with total delivery volumes cratering 24.7% on a year-over-year basis.
Nissan posted a 10% decline in sales volumes for the quarter under review. Third-quarter volumes at Subaru and Mitsubishi dropped 16.5% and 4.3%, respectively. While third-quarter sales of Mazda rose year over year, September deliveries declined around 1%. Volumes at Volvo tumbled 9% in September, snapping a 15-month streak of year-over-year sales increase in the United States.
Germany-based auto giant Volkswagen’s sales dwindled 8.2% year over year to 79,321 vehicles in the third quarter. While SUV sales were up 18% year over year, car sales plummeted 49%. Close peer BMW, however, reported a year-over-year sales increase of 4.4% for the quarter, with sales of the namesake brand increasing 8.7%, while that of MINI brand dropping 28.9%.
Inventory Levels Continue to Fall, Incentives Decline
The industry is struggling with low inventory, with less than a million vehicles in inventory for retail sale. According to J.D. Power Estimates, retail inventories at dealerships dipped another 22,000 units to 920,000 last month from 942,000 in August. Per Cox Automotive, there were 1.4 million fewer new vehicles in inventory last month compared with the year-ago period, and 2.5 million fewer units than September 2019.
Amid low inventories, dealers are induced to slash discounts; as such average incentive spending per new vehicle is likely to decline to $1,755 in September versus $3,792 recorded in September 2020, per JD Power and LMC Automotive Estimates. Per TrueCar, average new-vehicle incentives have declined 42% year over year last month to $2,326.
Little Respite in Sight
In the absence of a quick solution to this chip problem, consumers are likely to have a hard time finding new vehicles and specific models at dealerships. Also, with prices going through the roof owing to supply-demand mismatch, customers might just not be willing to pay a heavy premium to get their hands on vehicles of their choice.
Per JD Power, the average sales price of a new vehicle hit a record of $42,802 last month. With high prices and limited options, buyers are willing to wait until the inventory situation improves.
However, with automakers continuing to slash production and temporarily shutter factories, it will get difficult for dealerships to replenish inventories to a level that is necessary to support a higher sales pace. In fact, with most of the auto bigwigs being of the opinion that the chip deficit will linger well into 2022, we believe it will take time for the industry to regain its lost ground.
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