U.S. Car Sales Plummeted in September: Single Outcome for Dual Stock Action

New car sales plunged over the last quarter in the U.S. despite strong demand, as the shortage of computer microchips and other supply chain issues caused shutdowns at auto factories and choked off the supply of vehicles.

General Motors (GM) reported sales fell a whopping 48.8% from a year-ago last quarter to slightly less than 447 thousand units vs. -31.5% consensus forecast, and they were off 40% from the same quarter of 2019 before the pandemic roiled the car market, due to semiconductor supply chain disruptions and historically low inventories. Sales at Stellantis, the company formed by the merger of Fiat Chrysler and France's PSA Group, fell 19% from a year ago, and 27% from the pre-pandemic period. Buick sales were down over 20%, Cadillac -31.7% and Chevrolet slipped slightly over 36% for the quarter. On YTD basis total sales for Buick were still in the positive territory showing increases by 27%, GMC by 8% and Cadillac by 11%.

At Toyota Motor (TM), which includes Toyota and Lexus, Q3 2021 sales edged up 1.4% compared to a year ago. But that three-month total includes a 22% plunge in September sales. (The company reports out monthly sales numbers, unlike GM and Stellantis.) While Toyota has reported fewer supply chain disruptions than other major automakers it, too, cut back production at some factories more recently.

Unsurprisingly, all the automakers pointed to semiconductor supply chain disruptions and historically low inventories as a cornerstone problem for sales. While the various supply chain disruptions that the industry faces continue to impact the automakers’ available inventory, the demand for vehicles is still high and projected to become even higher as currently owned and operated cars will be aging. The shortage of vehicles has also led to record-high prices for both new and used cars for much of this year, which, however, resulted in the mass postponement of prospective buyers’ decisions to buy a new car, as some buyers have been priced out of the new car market.

The auto industry has been dealing with a shortage of computer chips needed to build cars for more than a year. GM (GM) said it expects the situation will improve in the final three months of 2021, but earlier this year automakers had hoped things would have improved by this point. Instead, GM has been forced to temporarily shut production of most of its North American plants.

There are two expected outcomes from this ongoing sad story – short-term and long-term. In the immediate run, the world’s biggest automakers will experience the continuing plunge in sales and revenues, undermining their fundamentals. But in the long run, as current bottlenecks resolve, normal volume production resumes, and, consequently, manufacturers’ offer starts to meet the demand, so prices tend to decline – we expect one-or-two full years of elevated sales patterns until all deferred car purchases are filled. Therefore it would be smart while waiting for the continuing downfall of the industry leaders’ stocks, to also monitor the best time to enter their shares at their lows in anticipation of the fulfillment of this ongoing scenario.