Auto Sales Dropped In Q3: ETF And Stocks In Focus

The U.S. auto industry is facing tough times this year given higher interest rates, rising vehicle prices and the looming threat of tariffs on European and Japanese auto imports. After rising 1.8% in the first six months, auto sales fell 4% in the third quarter despite strong demand for SUVs and some pickups.

Of the six major American and Japanese automakers, sales at General Motors (GM - Free Report) declined the most, plunging 11% in the third quarter, followed by decreases of 10% for Fiat Chrysler (FCAU - Free Report), 9% for Nissan Motor (NSANY - Free Report), 6% for Toyota Motors (TM - Free Report), 5% for Honda Motors (HMC - Free Report) and 4% for Ford Motors (F - Free Report).

Notably, auto sales were down 7% in September partly due to a decline in sales in areas hit by Hurricane Florence and a tough year-over-year comparison as consumers rushed to replace vehicles damaged by Hurricane Harvey last year.

More Pain Ahead?

Consumers have long been shifting from traditional passenger cars to larger and more comfortable pickup trucks, SUVs and crossovers. But the number of new models is now growing faster than demand, threatening the fat profits that automakers have enjoyed over the past several years. Additionally, higher rates have made financing of new vehicles expensive. Further, new tariffs on imported steel and aluminum may deal a big blow to the industry as these would increase the cost of auto production. The potential tariffs on cars and auto components are also the big threats to the auto industry.

However, a new trilateral agreement among the United States, Mexico, and Canada, which will govern $1 trillion worth of trade, will likely ease uncertainty in the industry. Additionally, 18-year high consumer confidence, a strong job market, and a booming economy will propel sales in the months ahead. Tax cuts are providing a lift to consumers’ spending power, leading to higher demand for vehicles.

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