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Auto Sales Finally Rebounding: Can Carmakers Bounce Back?

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The automobile market in the United States is finally getting back on track after taking a bad hit last year. The pandemic saw factories being closed for weeks, which left the carmakers bleeding for the rest of last year. However, this year seems to have started on a better note. According to J.D. Power, automakers for April posted solid growth.

Although the shortage of semiconductors poses a threat for the industry, several brands reported a more than double year-over-year jump in sales. Also, people are willing to spend more and are buying expensive vehicles, thus boosting carmakers’ revenues.

April Auto Sales Surge

April was one of the best months for the automobile industry in a long time, or at least since the coronavirus outbreak early last year. According to J.D. Power, new vehicle sales reached 13.6 million units, surging 110.6% year over year.

Trucks and SUV sales are expected to account for 76.1% of the total new vehicle sales. Moreover, new vehicle sales jumped 20.8% from 2019. The record surge in sales comes despite low inventory, which has prompted many dealers to increase the price of vehicles.

However, people still did not mind shelling out more money to buy expensive cars. Almost all major carmakers reported robust sales. Ford Motor Company (F - Free Report) reported a sales jump of 13% year over year. Honda Motor Co., Ltd’s (HMC - Free Report) sales are up 40% so far over 2020. Ford carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Toyota Motors (TM - Free Report) also reported a surge of 45% in new vehicle sales in April. General Motors Company (GM - Free Report) doesn’t report monthly sales anymore but the company reported that deliveries grew 19% year over year in the first quarter. The company also reported $3 billion in profits in the first quarter, indicating that sales have been on the rise.

Auto Sales Project to Grow

April’s sales jump might look a bit too big because sales fell more than 50% in April 2020 after factories had to be closed down temporarily for weeks, following the coronavirus outbreak. Sales started rebounding from May but automakers continued to struggle.

The industry finally started showing some signs of a rebound in the fourth quarter of 2020. This year has so far been good with first-quarter auto sales jumping 13% year over year. With the economy now reopening, another round of stimulus checks in hand and the vaccination drive in full swing, consumer demand for new vehicles is again on the rise.

However, inventories continue to be curtailed by a shortage of microchips. The price hike stemming from this has not however dented sales of new vehicles.

Per TrueCar, U.S. new-vehicle sales in April are expected to reach 1.4 million, suggesting a surge of 97% from April 2020. This once again shows the high demand for new cars. According to a CNBC report, Cox Automotive and LMC Automotive expect auto sales to reach 15.7 million units in 2021.

Given that the Fed is also backing automakers in seeking a speedy solution to the semiconductor shortage, it is likely that the industry will soon bounce back and perform even better than the pre-COVID times.

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