The Auto Page -- As In Automobile -- April 2, 2022

Three words one doesn't like to see in the same sentence: auto sales plunge. 

Source.

US auto sales plunge in 1Q22 for GM, Toyota, Honda. 

Putting best spin on it that they can: GM sees headwinds easing. Would you expect them to say things are gonna get worse? LOL. 

It is interesting: we do need a new car. My first choice: Honda. My wife's first choice: something else. 

We stopped by the Honda dealership -- within walking distance of our apartment complex -- twice during the month of March. Both times: nothing available. I mean, literally, nothing available. This has to be killing the local dealerships. On top of that, they have to pay top dollar for used cars as trade-ins. 

We weren't even given the option of paying money down to reserve something, anything. One would think they would change the business model to adapt to reality.

But I digress. How was the first quarter for automobile manufacturers? Well, I would say it was Will Smith playing the role of semiconductor manufacturers and Chris Rock playing the role of automobile manufacturers.

If folks recall, of all the manufacturers, Ford was hit the hardest the earliest when a fire destroyed the facility of their lone chip manufacturer. Seldom reported. Eager to get that story behind them.

Industry wide, the annualized pace of new auto sales in March will reach 12.7 million vehicles , J.D. Power and LMC Automotive estimated. That would be down by more than 1 million units vs. February and down by more than 5 million vs. March 2021.

I don't know the history, but a decline of 5 million seems like a lot. Okay, here it is: "....will reach 12.7 million, a decline of more than 5 million..." 12.7+5 = 17.7. 5 / 17.7 = a decline of almost 30% annualized. 

Bloomberg: Toyota bests GM again in latest US auto sales update.

• carmakers post sales drop in first three months on chip dearth
• demand for hybrids helps Toyota stay ahead of rival GM
• CNBC one month ago:
• Wall Street praises Ford's EV plans but questions its sales and profit margin targets
• analysts question whether Ford can achieve a 10% operating profit margin by 2026, while increasing global EV production to 2 million units by that timeframe
• one called it "an aspirational / stretch goal"; another called it "ambitious." They were tactful not to call it "dreaming."
  

Two thoughts:

• where's the urgency for investors, no FOMO: looking to achieve a 10% operating profit margin five years from now?
• global sales of only 2 million EVs -- that doesn't seem like enough EV penetration to save the earth from global warming;

I'm re-thinking the urgency to accumulate shares in automotive manufacturers.

By make, compared to one year ago, same quarter:

• Toyota: down 15%
• GM: down 24%
• F: down 17% (but early indications are that 2Q22 will be even worse); says F-150 Lightning on track; deliveries are set to begin in spring (spring = March 22 - June 21?)
• Stellantis: down 13%
• Honda: down 27% (as noted above, literally nothing available on their dealers' lots)

It may be interesting to compare winners and losers based on sales decline year/year, but it's hard to see any winners at all. 

I assume spring, the second quarter, is the best quarter for sales. I don't know, but I'm sure a lot of folks will be watching.

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Background

Re-posting from yesterday:

Autos:

• it looks like I was a bit too optimistic;
• I suggested a few weeks ago that there would be a glut of new cars reaching dealers this summer; now, not so sure:
• reported yesterday, GM and Ford to stop production of sedans for one week, due to chip shortage;
• now, add Stellantis: will shut down its Belvidere, IL, midsize SUV plant, and its Detroit, MI, full-size SUV plant next week for one week; source;
• Ford Mustang production also temporarily halted due to chip shortage -- that was back in January, 2022; source;
• now, today, Ford to halt Mustang production at Michigan due to chip shortage; source;
• the key word is "significantly" -- Ford Mustang Mach-E sales down significantly in February, 2022; source; note the source for this story; volume dropped by almost half year-over-year; margins already very, slim on EVs; will get worse
• note the spin they try to put on this story: 

Ford Mustang Mach-E Ford Mustang Mach-E sales in February amounted to 2,001, which is surprisingly 46.5% less than in February 2021. 

We hoped that the Mach-E would improve as the demand is high, but the company is clearly struggling on the production side. 

We heard that in February production was halted due to a lack of semiconductors, which means that the situation will not likely improve significantly in the near future. 

Nonetheless, the Ford Mustang Mach-E was responsible for 1.6% of the total Ford sales volume in the US.

• Nonetheless.

• None.

• Less.

Before this is over, we'll all be driving pickup trucks

• I don't know about you, but "in the near future" suggests at a minimum, 18 months;
• and then, this, chariots on fire; it's not just Teslas any more: Ford recalls 737,000 US vehicles over software and fire-risk issues; source;
• I continue to accumulate shares in Ford, but there is obviously no hurry. no FOMO;
• by the way, making things worse for automobiles manufacturers and consumers: President Biden reinstated the huge CAFE requirements for US car companies; these mandates will significantly increase the cost of cars people want, and increase the costs of cars people don't want even more.

Update, April 16, 2022:

• I've sold all my share in Ford (F) and doubt I will be investing in Ford again any time soon.