Auto Sales: GM, Ford To Lead Q3 Rebound, But Challenges Persist | Investor's Business Daily - Investor's Business Daily

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Led by General Motors (GM), U.S. auto sales are seen modestly rebounding in the third quarter, as improved vehicle production allows carmakers to tap pent-up consumer demand.

Ford (F) and Tesla (TSLA) are also expected to contribute to Q3 sales gains. However, Toyota Motors (TM) and Honda Motor (HMC) are expected to post sales declines due to lingering inventory issues for the Japanese brands.

Lack of supply, rather than lack of demand, has been weighing on auto sales. Automakers are due to report sales for September and the third quarter on Monday, Oct. 3.

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Sometime in early October, Tesla will report global Q3 production and delivery numbers as well.

Auto stocks sold off hard on Sept. 29. Used-car dealer CarMax (KMX) badly missed earnings views, citing "affordability challenges." Moody's downgraded the global auto industry to negative from stable, also citing customer affordability issues due to higher prices and weaker economies. It also noted higher costs for automakers.

U.S. Auto Sales Set To Rebound

The annualized pace of total new vehicle sales in September should reach 13.6 million units, J.D. Power and LMC Automotive estimate. That would be up 1.5 million units from a year ago.

By volume, total new vehicle sales over the full third quarter are projected to reach nearly 3.4 million units, a 0.2% increase from the year-ago period, J.D. Power said. In Q2, auto sales had slumped for automakers across the board, except for Ford.

One year ago, a lack of inventory fueled by Covid-19 supply disruptions began hurting the new car market. Inventory levels have improved since but remain well below pre-pandemic levels, market watchers say.

Here is how automakers are expected to perform in Q3, according to Cox Automotive. The results show sales volume, as well as sales growth or decline vs. a year ago.

General Motors

Q3 sales estimate: 539,028 vehicles, up 21.6%.

Results: Check back Monday.

GM stock tumbled 6% in Thursday's stock market action, after snapping a six-day losing streaking on Wednesday. Shares recently undercut the 50-day moving average and remain below the 200-day line.

In early September, GM CEO Mary Barra reportedly said in a TV interview that she sees the chip shortage "into next year, maybe a little beyond."

Traditional automakers continue to accelerate on electric vehicles, which need more chips.

Recently, GM started initial deliveries of two important new EVs, the Lyriq SUV and Hummer pickup. Investors will be looking for any signs that production has picked up or will soon. An Ultium battery factory finally began production recently.

Three new "high-volume" EVs are coming in 2023, including an Equinox starting at roughly $30,000, General Motors said in July.

Toyota Motor

Q3 sales estimate: 513,846, down 9.2%.

Results: Check back Monday.

Toyota Motor stock slumped 2.9% Thursday, hitting a 23-month low.

Ford Motor

Q3 sales estimate: 473,595, up 19.1%.

Results: Check back later.

Ford stock skidded 6.5% Thursday, after ending a six-day losing streak Wednesday. Shares remain below the 50- and 200-day lines.

Stellantis

Q3 sales estimate: 388,481, down 5.5%.

Results: Check back Monday.

Stellantis stock fell 5.4% Thursday.

Honda Motor

Q3 sales estimate: 211,326, down 38.9%.

Results: Check back Monday.

Honda stock retreated 3.5% Thursday to a two-year low.

Tesla

Q3 sales estimate: 126,844 premium and luxury EVs in the U.S., up 38.3%.

Results: Tesla will report global Q3 deliveries soon, but will not break out U.S. sales.

Tesla stock tumbled 7.3% on Thursday, falling sharply from near its 50-day and 200-day lines.

Outlook For Q4 Auto Sales

Analysts at J.D. Power and LMC Automotive expect production constraints to continue in October and lead to a "somewhat lumpy" fourth quarter. On Wednesday, analysts at Cox Automotive again lowered their full-year 2022 forecast, now predicting 13.7 million units, down more than 9% from 2021 and the lowest level in a decade.

Those warnings come after Ford cautioned on Sept. 20 that it could have 40,000-45,000 partially built vehicles in inventory at the end of the current third quarter, awaiting parts needed for completion. It still expects to complete and deliver those vehicles in Q4.

Find Aparna Narayanan on Twitter at @IBD_Aparna.

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