The auto industry in 2018
After trading on a positive note in 2016 and 2017, the stock of the largest US automaker, General Motors (GM), ended 2018 on a negative note with a loss of 18.4%.
Nearly all mainstream automakers underperformed the broader market last year due to weakening US auto sales and the negative impact of tariffs on their businesses.
In 2018, the S&P 500 Index fell 6.2%, while auto companies such as Ford Motor Company (F), Fiat Chrysler Automobiles (FCAU), Toyota Motor (TM), and Honda Motor Company (HMC) fell ~38.1%, 18.9%, 8.7%, and 22.4%, respectively. The broader market largely traded on a positive note in every quarter of 2018 except the fourth, when factors such as rising interest rates and America’s trade war (SPY) with China and European countries started taking a toll on market sentiments.
GM stock’s performance in the first quarter
Auto stocks started 2019 on a strong note, with most legacy automakers outperforming the broader market in January. Better-than-expected 2018 US auto sales, which were slightly higher than sales in 2017, helped boost investors’ confidence. In January and February, GM stock rose 16.7% and 1.2%, respectively.
However, the stock has erased some of these gains in March. As of March 20, General Motors has fallen ~6.3% so far this month compared to the 1.4% gain in the S&P 500 benchmark. In comparison, Ford, TM, and HMC have fallen 3.0%, 1.1%, and 2.9%, respectively.
Before we take a look at one of the key drivers of GM’s recent losses, let’s take a quick look at the trend in its financials.