auto sales

Auto Sales Recover in September: Will Carmakers Bounce Back?

U.S. auto sales are showing signs of recovery as demand for new vehicles continue to increase following the reopening of the economy. Sales declined in the third quarter but are far better than the sharp plunge witnessed in the second quarter. In fact, sales in September grew year over year, which is a good sign.

Although the path to recovery to long and could take years, automakers are hopeful that sales are likely to pick up with demand increasing. The auto industry was already struggling for a while and the coronavirus outbreak put a brake on car sales again but the picture seems to be finally changing.

September Auto Sales Grow YoY

Auto sales in September grew 4.8% year over year, marking the first increase since February. Consistently lower interest rates encouraged new-car buyers, who are less likely to be financially hindered by the economic fallout of the pandemic, to pull the trigger on a purchase. According to J.D. Power, the average purchase price hit a record in September, at $35,655. The old record of $35,420 was set in August.

However, sales declined 9.7% in the third quarter. But it may not be as bad as it looks given the ongoing pandemic. In fact, for an industry whose factories were closed just five months ago due to the novel coronavirus, the recovery is quite good. The July-through-September dip is small compared to the 31% decline in the second quarter when dealers were closed and it took 0% loans to entice customers.

Low Interest Rates, Discount Boosting Sales

Automakers reported that people are buying more expensive trucks, and they’re loading them with options, pushing prices up. Plus, because inventories are low, discounts are down. Trucks and SUVs have likely accounted for more than 76% of new vehicle sales, a record for September, according to J.D. Power.

Among major carmakers, General Motors GM has been witnessing a steady recovery. The company saw a 9.9% sales drop in the second quarter compared with a year ago but said that sales increased every month since July. Ford Motor Co F said on Oct 2 that it continues to show signs of a recovery from the COVID-19 pandemic as demand for sports utility vehicles and pickup trucks gained momentum in the third quarter in the United States.

However, the No.2 U.S. automaker posted a 5% decline in sales for the third quarter. Then again, the company said that a continuing recovery from the pandemic-induced lockdowns helped it to record better sales compared with the second quarter.

Fiat Chrysler Automobiles N.V. FCAU said that it sold 507,351 vehicles in the third quarter, marking a 10% decline year over year, as strong retail sales offset much of the ongoing softness in fleet purchases. However, third-quarter total sales finished 38% higher than the second-quarter results as FCA sold 140,265 more vehicles.

No doubt carmakers continue to struggle. But September finally proved to be the best month since February as the pandemic started compelling companies to halt production in March. Toyota Motor Corporation TM too registered a rise in September sales. Toyota’s September unit sales grew 16.2% to 197,124, reflecting an increase of 16.2% on a volume basis. Toyota Division sales for the month were up 14.3% on a volume basis, and Lexus Division sales were up 31.3%. Fiat has a Zacks Rank #1 (Buy), while Toyota carries a Zacks Rank #2. General Motors and Ford each carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Honda Motor Co., Ltd HMC also said that it saw sales growth for the first time since the outbreak of the COVID-19 pandemic. The automaker reported an 11% gain in sales for the month to 114,117 in the United States and sales were up across the board for both the Honda and Acura brands and for both cars and light trucks.

Needless to say, people have once again started showing confidence in the economy and are braving all odds to purchase new vehicles. September may finally mark the beginning of a bounce back for carmakers.

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