Ford (F) could see a 37% drop in U.S. auto sales for the third quarter, outpacing a 29% drop for General Motors (GM). The projected drops come after the U.S. auto giants idled factories due to a shortage of chips and other disruptions to global supply chains weighing on vehicle inventories in dealer lots.
On Friday, carmakers in the U.S. are due to report Q3 auto sales.
The seasonally adjusted annualized rate (SAAR) for sales of new vehicles is expected to reach 12.2 million units in September, according to J.D. Power and LMC Automotive. That would be down 4 million units from September 2020 and down 4.9 million units from September 2019.
“September results show that there are simply not enough vehicles available to meet consumer demand,” said Thomas King, president of the data and analytics division at J.D. Power. Inventories and production of vehicles are at historical lows, with supply disruptions continuing to challenge global automakers and pushing many car buyers out of the market.
Strong Demand, Rising Prices Underpin U.S. Auto Sales
As a result, new vehicles arriving at dealerships are selling extremely quickly, analysts say. In September, nearly half of vehicles are being sold within 10 days of arriving on dealer lots.
One consequence of the mismatch between strong consumer demand and constrained inventories: nose-bleed prices. Average transaction prices are expected to reach $42,802 in September, up 19% from a year ago and an all-time high.
So auto “manufacturers and retailers will continue to benefit from the current intense level of consumer demand, achieving higher profits per every unit sold,” said King.
For Q3, Ford is likely to report a 37% U.S. sales drop vs. the same period a year ago, Cox Automotive estimates. That would compare to declines of 29% for General Motors, and 23% for Stellantis (STLA), the parent company of Fiat, Chrysler and Peugeot. U.S. sales also should fall 9% for Honda (HMC) and 8% for Volkswagen (VWAGY). Bucking the trend, Toyota (TM) should see a sales gain of 5%.
Still, on Sept. 10 Toyota became the latest carmaker to warn about production cuts because of the global auto chip shortage. It said it would make about 40% fewer cars and trucks globally in October.
GM, Ford Stocks Work On Buy Points
Shares of General Motors added 0.2% to 53.28 on the stock market today. GM stock is working on a 64.40 buy point of a cup base, back above the 50-day line but still below the 200-day line for now. Ford stock gained 1.6% to 14.39 Tuesday. Shares of Ford sit above both the 50-day and 200-day lines as they work on a 16.55 cup-shaped buy point, according to MarketSmith chart analysis.
In August and September, both Ford and GM shut down factories temporarily as the auto chip shortage worsened. The delta variant of the novel coronavirus hit chip factories in Southeast Asia hard, straining global supply chains further.
For GM and Ford, those shutdowns included factories that build popular and profitable pickup trucks.
Analysts now expect the market won’t recover until 2022 or even 2023. J.D. Power “substantially cut” its 2021 global sales forecast by 3 million units to 80.6 million units. The firm also cut its 2022 sales outlook by 6.5 million units to 85.2 million. It warns that another 5 million units are at risk next year.
Find Aparna Narayanan on Twitter at @IBD_Aparna
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