Key Factors for Auto Investors in 3Q17
Truck sales data
According to recent data compiled by Autodata, US truck sales rose 3.5% YoY (year-over-year) in the first seven months of 2017. Small car sales in the country fell sharply, by 11.7% YoY. Small cars tend to have better fuel economy than heavyweight vehicles such as trucks and unity vehicles. Consistent weakness in gasoline prices could be one of the primary reasons for consumers’ inclination towards trucks and utility vehicles. In the first half of 2017, WTI (West Texas Intermediate) crude oil prices fell ~12.8%.
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Any weakness in truck sales could severely affect automakers’ profitability, as trucks yield wider profit margins than small cars. Therefore, auto investors should follow truck sales closely in 3H17.
International market expansion
As the US auto market (XLY) is experiencing a dull phase with weakening sales, it’s important for automakers to pay attention to other growth markets. Among growth markets, China is certainly the most attractive for global automakers—which is why legacy automakers General Motors (GM), Ford Motor (F), Toyota (TM), and Fiat Chrysler (FCAU) have increased their focus on the Chinese market.
Focus on new technology
Automakers’ race to build affordable electric vehicles and advanced autonomous vehicles has accelerated in the last few years, prompting them to make heavy investments in product innovation. Investors should pay attention to updates related to auto companies’ investments, as they may yield high returns in the long run. Visit Market Realist’s Autos page for updates in the industry.