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Automakers’ Stocks Trade on Cautious Note with Declining US Auto Sales

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Nov. 20 2020, Updated 3:38 p.m. ET

Automakers’ stocks in August

Auto companies’ stocks remained firm in July, showing strengthening sales figures. However, in August, auto stocks traded mostly on a cautious note due to the possibility of US auto sales being at its peak.

Previously, in the first half of 2016, mainstream automakers’ stocks witnessed a rollercoaster ride, with a marginally negative bias. Let’s take a closer look at how the declining US auto sales in August could be a possible explanation for this uncertainty on Wall Street.

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August US auto sales weaken

In August 2016, US vehicle sales remained subdued and posted a SAAR (seasonally adjusted annual rate) of ~16.9 million vehicles. This was much lower than the SAAR of ~17.7 million vehicle units in August 2015.

The SAAR of US vehicle sales in July 2016 was positive at 17.77 million vehicle units—the highest so far in fiscal 2016.

Optimism in 3Q16 so far

In 3Q16 so far, most of the auto companies have outperformed the broader market (SPY). As of September 6, 2016, General Motors (GM) and Fiat Chrysler Automobiles (FCAU) have gained by 13.5% and 11.4%, respectively, in the third quarter. In the same period, Ford Motor (F) was still trading flat with marginal gains of 0.8%, as compared to the 4.2% gain seen in the S&P 500 index.

Investors’ concerns about Ford’s ability to achieve its fiscal 2016 guidance could be the primary reason behind this decline. During its 2Q16 earnings release, Ford highlighted the risks and challenges it might face while attempting to achieve its 2016 guidance.

As of September 2016, popular US electric car maker Tesla (TSLA) has attracted selling pressure on Wall Street in 3Q16 so far and is trading with a 4.5% value erosion. In the past few months, Tesla faced sharp criticism related to its Autopilot feature. You can read here how the company has been dealing with it.

Continue to the next part for a look at how truck sales continue to beat car sales in the US auto market.

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