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Auto Sales Preview: This Firm Sees Strong End To The Year

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Auto Sales Preview: This Firm Sees Strong End To The Year
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  • Shares of both Ford Motor Company (NYSE: F) and General Motors Company (NYSE: GM) have appreciated by single-digit percentages in the last one month.
  • JP Morgan’s Ryan Brinkman mentioned that robust US in November and better-than-expected China sales bode well for the performance of automakers in 4Q.
  • Both the companies were benefiting substantially from the strong demand, Brinkman added.

US LV SAAR [Light Vehicle, Seasonally Adjusted Annual Rate] tracked 18.1 mn in October. This represented a 10 percent increase versus the year-ago figure, and was in-line with the figure recorded in September.

Analyst Ryan Brinkman expects US LV SAAR to reach “an extremely strong” 18.5 mn in November. The pace of sales indicates that Americans could end November having purchased more new cars and trucks than in any other month during the current cycle, as well as beating all other November figures.

“Some automakers we spoke to were surprised at the rate of improvement in recent months, pointing to unexpectedly strong consumer reaction to only modestly higher incentives, which has lowered inventories (a recipe for strong profitability),” Brinkman wrote.

Channel checks had indicated that incentives are tracking roughly at over $100 y/y, although down $60 q/q. They also suggest that average transaction prices are up more than $1,000 y/y, “despite the higher incentives, given a richer mix of vehicles sold, including more pickup trucks and SUVs and more crossovers relative to cars,” the JP Morgan report noted.

Demand seems to be robust and General Motors and Ford appear to be “benefitting mightily (coming off very strong sales in China last month as well), again boding well for 4Q,” Brinkman commented. He added that General Motors may be expected to record a sell-day adjusted 10.0 percent y/y gain and Ford may report a 14.0 percent y/y increase.

Posted-In: JP Morgan Ryan BrinkmanAnalyst Color Previews Top Stories Trading Ideas Best of Benzinga

 

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