8 Jul

Why Auto Stocks are Sagging despite Booming US Vehicle Sales

WRITTEN BY Mohit Oberoi, CFA

US vehicle sales

In June, US vehicle sales topped an SAAR (seasonally adjusted annual rate) of 17 million. This appears to be the second consecutive month when sales have exceeded 17 million on an annualized basis. In May, US vehicle increased 2% over the previous year and finished a whisker short of the psychologically crucial 18 million SAAR.

Why Auto Stocks are Sagging despite Booming US Vehicle Sales

Vehicle sales have been strong

The chart above shows US vehicle sales. The housing and automobile sectors were among the worst-hit in the 2008 financial crisis. Housing industry indicators have touched their pre-crisis levels in recent months. However, the automobile industry achieved this feat only last year, when sales were their highest since 2006. Now, the industry is poised to better its performance this year, and it looks set to hit the 17 million sales mark.

Series overview

Despite strong vehicle sales in the United States, automobile companies’ share prices have lagged on Wall Street. Both Ford (F) and General Motors (GM) have underperformed the broader US markets (SPY)(IVV). However, Tesla (TSLA) has gained more than a quarter in market capitalization so far in 2015. The company seems to have struck the right note with investors.

In this series, we’ll analyze the recent automobile industry indicators. We’ll discuss where US auto sales could be headed in the coming months. We’ll also discuss the possible reasons behind the recent underperformance of mainstream US automobile companies.

Plus, we’ll see how auto companies’ Q2 earnings could play out.

Let’s begin by looking at the recent employment data. Read on to the next part of this series.

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