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November Auto Sales Decline on Waning Passenger Car Demand

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In November, U.S. light-vehicle sales witnessed a decline of 0.5%. Part of the fall can be attributed to rising interest rates, which is making car payments more expensive. However, waning popularity of small passenger cars, given the rising demand for crossovers, sports utility vehicles (SUVs) and trucks, was the major reason behind the decline.

Higher interest rates and tariffs-induced rise in prices were expected to negatively impact sales. But, holiday season deals aided U.S. auto sales in November, limiting the extent of annual sales decline. November traditionally benefits from efforts by dealers to clear out stock ahead of New Year. Also, a continuing boom in SUV sales helped automakers.

Automakers’ Sales Performance

According to some sources, the leading carmaker General Motors Company (GM - Free Report) recorded an approximately 1% rise in sales. Notably, the company reports U.S. auto sales numbers on a quarterly basis instead of its erstwhile practice of reporting on a monthly basis. In fact, General Motors, like many of its peers, is scaling down production of passenger cars. The auto giant is rather emphasizing on the expansion and upgrade of the line-ups of crossovers to safeguard its profit margins and respond to the meteoric transformation in consumers’ taste toward roomier vehicles. General Motors recently announced its plans to idle a few plants globally, in an effort to improve business performance. (Read more: General Motors to Lay Off & Halt Production in North America)

The second-largest U.S. automaker Ford Motor Company (F - Free Report) recorded a 7% decline in sales in November. During the month, Ford’s passenger vehicles sales in the United States fell 19.5% year over year while SUVs recorded a modest 4.9% decline. The sales decline can be attributed to weak sales of Focus sedans and Mustang sports cars. Recently, the automaker reshuffled its workers at several of its plants to meet growing demand for pickup trucks and large SUVs. (Read more: Ford Relocates Workers Across Plants to Boost SUV Production)

Fiat Chrysler Automobiles N.V. (FCAU - Free Report) continued to buck the industry's downward trend in November. Its sales jumped 17% during the month, backed by strong sales of jeeps and SUVs. The Jeep Wrangler, Cherokee and Compass each posted sales growth of more than 20%.

On the other hand, Japanese automakers Honda Motor Co., Ltd. (HMC - Free Report) and Toyota Motor Corporation (TM - Free Report) reported sales decline of 9.5% and 0.6%, respectively, in November. Honda’s passenger car sales declined 12.6% while sales of SUVs, crossovers and pickups decreased 6.8%. Toyota’s passenger car sales fell 17.3% while its other lineups rose 10.6%.

Conclusion

The November sales figures clearly indicate shift in consumer preference from passenger cars to spacious crossovers and SUVs. Taking cue from this trend, the auto bigwigs are reshuffling their production accordingly. However, this transition requires huge cash as well, putting pressure on the automakers’ financials.

Currently, while General Motors, Honda and Toyota carry a Zacks Rank #2 (Buy), Ford and Fiat Chrysler has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Honda, Ford, Toyota, General Motors and Fiat Chrysler have an expected long-term growth rate of 2.9%, 5.3%, 6%, 8.5% and 25.3%, respectively.

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