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CARZ ETF in Focus on Decline in Auto Sales in August
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Autodata recently reported that light-vehicle sales in the U.S. witnessed a year-on-year decline in August. General Motors Company (GM - Free Report) was the leader in terms of sales volume for Aug 2016 while FCA US was the only company among major automakers to witness an increase in sales last month. However, the auto industry expects a strong second half of 2016 despite last month’s decline.
Decline in Auto Sales
According to the Autodata report, light-vehicle sales in the U.S. dropped 3.5% year over year to 1.51 million units in August, witnessing a decline for the third time this year. Moreover, sales on a seasonally adjusted annualized rate (“SAAR”) basis declined from 17.86 million units in Jul 2016 and 17.79 million units in Aug 2015 to 16.97 million units in the month. Though trucks and utility vehicles continued to record strong sales, dismal sales of passenger cars weighed on overall sales growth.
While sales of SUV and trucks grew 2.4% from the year-ago period in August, passenger car sales witnessed a year-on-year slump of 12.6% last month, as per Autodata. Moreover, Truecar recently blamed that a 2.2% decline in incentives from July played an important role in dragging down auto sales down last month. Though the auto industry expects sales to remain strong during the second half of 2016, total sales for the year are now anticipated to come below 2015’s record sales of 17.47 million vehicles (read: 6 Sector ETFs Threatened by Brexit Uncertainty).
Major Automakers in Focus
Among the major U.S. automakers, General Motors’ vehicle sales declined 5.2% from the year-ago level to 256,429 units in August. Retail sales also fell 5.4% to 212,915 units. Moreover, Ford Motor Co. (F - Free Report) reported an 8.4% decrease in U.S. sales from the year-ago period to 214,482 vehicles last month. While sales volume of the Lincoln brand vehicles were up 7% year over year to 9,243 units in the month, sales of the Ford brand declined 9% year over year to 205,239 vehicles. However, FCA US LLC – controlled by Fiat Chrysler Automobiles – recorded a 3% year-over-year rise in sales to 196,756 vehicles in August.
Japanese automakers also witnessed a significant decline in August. A 4.6% drop in sales at the Toyota division and a 7.6% decline in Lexus’ sales led Toyota Motor Corporation’s (TM - Free Report) total vehicle sales to drop 5% year over year to 213,125 units last month. Moreover, Honda Motor Co., Ltd. (HMC - Free Report) recorded a 3.8% year-over-year decrease in sales to 149,571 vehicles following 3.5% and 7% decline in sales at Honda Division and Acura Division, respectively. Also, Nissan Motor Co. Ltd. (NSANY - Free Report) reported a 6.5% year-over-year decline in sales to 124,638 vehicles in August (read: Auto Sales Plunge in May: ETFs & Stocks in Focus).
Bright Second-Half Outlook
Despite the decline in August, prospects of the auto industry remain strong for the second half of the year. The U.S. auto sector looks set for a good year, with sales already reaching 11.67 million units in the first eight months. General Motors’ chief economist, Mustafa Mohatarem said: “All the economic factors continue to point toward a strong second half of the year and another potential record year for the industry.”
Favorable labor-market conditions, rising consumer confidence, low fuel prices and easy availability of credit are likely to have a positive impact on auto sales in the days ahead. Separately, replacement demand for cars is expected to get a boost on the back of high average age of cars on the U.S. roads. However, it is not certain if annual sales will be able to surpass the record levels achieved in 2015. The pressure to maintain the attractive incentives and deals may have a negative impact on margins of automakers (read: Car ETF in Focus Post Upbeat Auto Earnings).
CARZ in Focus
First Trust NASDAQ Global Auto ETF (CARZ - Free Report) tracks the NASDAQ OMX Global Auto Index and has exposure to automobile manufacturers across the globe. The product holds 33 stocks in its basket with Toyota, Honda, General Motors and Ford placed among the top five holdings with a combined allocation of nearly 32% of fund assets. In terms of country exposure, Japan takes the top spot at 37.2% while the U.S. takes the second spot with 21.8% allocation, followed by Germany and China with 18.4% and 7.5% allocation, respectively (see all Consumer Discretionary ETFs here).
The ETF is neglected with $22 million in AUM and sees light trading volume of around 6,600 shares. The product is a bit expensive with 70 bps in annual fees and currently has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook.
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CARZ ETF in Focus on Decline in Auto Sales in August
Autodata recently reported that light-vehicle sales in the U.S. witnessed a year-on-year decline in August. General Motors Company (GM - Free Report) was the leader in terms of sales volume for Aug 2016 while FCA US was the only company among major automakers to witness an increase in sales last month. However, the auto industry expects a strong second half of 2016 despite last month’s decline.
Decline in Auto Sales
According to the Autodata report, light-vehicle sales in the U.S. dropped 3.5% year over year to 1.51 million units in August, witnessing a decline for the third time this year. Moreover, sales on a seasonally adjusted annualized rate (“SAAR”) basis declined from 17.86 million units in Jul 2016 and 17.79 million units in Aug 2015 to 16.97 million units in the month. Though trucks and utility vehicles continued to record strong sales, dismal sales of passenger cars weighed on overall sales growth.
While sales of SUV and trucks grew 2.4% from the year-ago period in August, passenger car sales witnessed a year-on-year slump of 12.6% last month, as per Autodata. Moreover, Truecar recently blamed that a 2.2% decline in incentives from July played an important role in dragging down auto sales down last month. Though the auto industry expects sales to remain strong during the second half of 2016, total sales for the year are now anticipated to come below 2015’s record sales of 17.47 million vehicles (read: 6 Sector ETFs Threatened by Brexit Uncertainty).
Major Automakers in Focus
Among the major U.S. automakers, General Motors’ vehicle sales declined 5.2% from the year-ago level to 256,429 units in August. Retail sales also fell 5.4% to 212,915 units. Moreover, Ford Motor Co. (F - Free Report) reported an 8.4% decrease in U.S. sales from the year-ago period to 214,482 vehicles last month. While sales volume of the Lincoln brand vehicles were up 7% year over year to 9,243 units in the month, sales of the Ford brand declined 9% year over year to 205,239 vehicles. However, FCA US LLC – controlled by Fiat Chrysler Automobiles – recorded a 3% year-over-year rise in sales to 196,756 vehicles in August.
Japanese automakers also witnessed a significant decline in August. A 4.6% drop in sales at the Toyota division and a 7.6% decline in Lexus’ sales led Toyota Motor Corporation’s (TM - Free Report) total vehicle sales to drop 5% year over year to 213,125 units last month. Moreover, Honda Motor Co., Ltd. (HMC - Free Report) recorded a 3.8% year-over-year decrease in sales to 149,571 vehicles following 3.5% and 7% decline in sales at Honda Division and Acura Division, respectively. Also, Nissan Motor Co. Ltd. (NSANY - Free Report) reported a 6.5% year-over-year decline in sales to 124,638 vehicles in August (read: Auto Sales Plunge in May: ETFs & Stocks in Focus).
Bright Second-Half Outlook
Despite the decline in August, prospects of the auto industry remain strong for the second half of the year. The U.S. auto sector looks set for a good year, with sales already reaching 11.67 million units in the first eight months. General Motors’ chief economist, Mustafa Mohatarem said: “All the economic factors continue to point toward a strong second half of the year and another potential record year for the industry.”
Favorable labor-market conditions, rising consumer confidence, low fuel prices and easy availability of credit are likely to have a positive impact on auto sales in the days ahead. Separately, replacement demand for cars is expected to get a boost on the back of high average age of cars on the U.S. roads. However, it is not certain if annual sales will be able to surpass the record levels achieved in 2015. The pressure to maintain the attractive incentives and deals may have a negative impact on margins of automakers (read: Car ETF in Focus Post Upbeat Auto Earnings).
CARZ in Focus
First Trust NASDAQ Global Auto ETF (CARZ - Free Report) tracks the NASDAQ OMX Global Auto Index and has exposure to automobile manufacturers across the globe. The product holds 33 stocks in its basket with Toyota, Honda, General Motors and Ford placed among the top five holdings with a combined allocation of nearly 32% of fund assets. In terms of country exposure, Japan takes the top spot at 37.2% while the U.S. takes the second spot with 21.8% allocation, followed by Germany and China with 18.4% and 7.5% allocation, respectively (see all Consumer Discretionary ETFs here).
The ETF is neglected with $22 million in AUM and sees light trading volume of around 6,600 shares. The product is a bit expensive with 70 bps in annual fees and currently has a Zacks ETF Rank #5 (Strong Sell) with a High risk outlook.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>