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Sweet November for US Auto Sales, 2016 Fate Hangs in Balance

Zacks Equity Research
Updated

U.S. light-vehicle sales rebounded with a 3.6% year-over-year increase to 1.38 million units in Nov 2016, following three months of decline. This is a new November high, which surpassed the previous record of 1.33 million units in Nov 2001.

However, sales on a seasonally adjusted annualized rate (“SAAR”) basis fell to 17.83 million units in the month from 18.07 million units in Nov 2015. Also, SAAR for November was lower than 17.98 million units in Oct 2016.

Sales benefited from two extra selling days in Nov 2016, attractive Black Friday deals and strong demand for higher margin product segments. While sales of crossovers and pickups increased in double digits, sales of light trucks also recorded strong improvement. However, sales of cars continued to fall.

General Motors Company GM was the leader in terms of sales volume for the month. It also recorded the maximum year-over-year sales improvement among six major American and Japanese automakers.

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Let's take a look at the U.S. sales figures reported by individual automakers.

U.S. Automakers

General Motors recorded 252,644 vehicle sales in November, marking a 10.2% year-over-year increase. Retail sales improved 7.9% to 197,609 units.

Ford Motor Co. F reported a 5.2% increase in U.S. sales from the year-ago period to 197,574 vehicles in Nov 2016. Sales volume of Lincoln brand vehicles advanced 19.1% year over year to 9,429 units in the month. Sales of the Ford brand improved 4.6% year over year to 188,145 vehicles.

FCA US LLC – controlled by Fiat Chrysler Automobiles FCAU – witnessed a 14% year-over-year fall in sales to 160,827 vehicles in Nov 2016.

Japanese Automakers

Toyota Motor Corp.’s TM sales improved 4.3% year over year to 197,645 units in Nov 2016. Sales at the Toyota division increased 5.3% to 168,595 units. Lexus’ sales moved down 1% to 29,050 units.

Honda Motor Co., Ltd. HMC recorded a 6.5% year-over-year rise in sales to 122,924 vehicles in the month. This is a new November record. Sales in the Honda Division improved 7.9% to a November record of 111,308 units. However, sales at the Acura Division fell 5.1% to 11,616 vehicles.

Nissan Motor Co. Ltd. NSANY reported a 7.5% year-over-year rise in sales to 115,136 vehicles in November. Sales in the Nissan division increased 8% to 103,024 units, while sales at the Infiniti Division improved 3.6% to 12,112 units.

Price Performance

Domestic automakers recorded strong performance in the stock market in November, while foreign automakers recorded mostly losses before recovering marginally toward the end of the month. The Presidential election had a significant impact, as is evident from the significantly better performance of domestic automakers since Election Day.

Overall, the Zacks-categorized ‘Auto Manufacturers-Domestic’ industry posted a 4.8% rise in stock prices in November, while the ‘Auto Manufacturers-Foreign’ industry inched up 0.5%.

Outlook

With year-to-date sales almost in line with the same period of last year, December sales figures will play a crucial role in deciding whether annual auto sales can hit a new record this year or mark the end of a six-year rising streak. Consequently, a lot of attractive holiday deals are expected as automakers strive to top their sales figures for 2016. However, we need to keep in mind that Dec 2016 has one less selling day than Dec 2015, which will make the task somewhat harder.

Even if the 2016 tally falls short of 2015, volumes will still be high, making it a good year for the auto industry.

Rising employment levels and personal income, low fuel prices and easy availability of credit are some factors that have been driving auto sales. Moreover, the high average age of cars on U.S. roads continues to boost replacement demand. However, the pressure to offer attractive incentives and deals may strain the margins for automakers.

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FORD MOTOR CO (F): Free Stock Analysis Report
 
HONDA MOTOR (HMC): Free Stock Analysis Report
 
TOYOTA MOTOR CP (TM): Free Stock Analysis Report
 
NISSAN ADR (NSANY): Free Stock Analysis Report
 
FIAT CHRYSLER (FCAU): Free Stock Analysis Report
 
GENERAL MOTORS (GM): Free Stock Analysis Report
 
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Zacks Investment Research