American Car Sales Are Beginning to Recover

October 2, 2020
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There has been good news for automakers and anyone invested in the industry this week. While sales are down year over year, they are beginning to rebound from the huge drop in the second quarter. Temporary shutdowns are now behind us, and the industry is likely to continue its momentum in the coming months.

Here’s everything that investors need to know about the latest developments.

Major Automakers Report Rebound in Car Sales

Car sales plunged in the second quarter of this year, with a drop of more than 30 percent. At the height of the Coronavirus Pandemic, people were spending less time shopping for new vehicles. With millions of Americans working from home and avoiding non-essential travel, the automobile market suffered.

Fiat Chrysler, Toyota, and General Motors have all reported third quarter sales declines close to 10 percent year over year, a significant improvement over the previous quarter.

Several factors are contributing to the recovery in the auto market. Record-low interest rates have made buying more affordable for millions of Americans. People with good credit can finance new vehicles with more favorable lending conditions. Because the Pandemic is still a threat to so many Americans, car travel is seen as safer than taking public transport. Analysts believe that this has also contributed to the recovery.

Toyota has released some of the most detailed figures of all the major manufacturers. The company suffered an 11 percent drop in sales in the second quarter. It has now reported that sales were up 16.2 percent in September. Broken down, the company saw a 24 percent increase in SUV sales and a 19.5 percent increase in truck sales. The popular Highlander and Tacoma models were the highest performers.

Hyundai was also a standout performer. The company’s data shows that it has almost fully recovered from the Pandemic. It saw only a 1.7 percent year over year decrease in sales during the third quarter.

How Long Will it Take for a Full Recovery?

Even the automakers that are yet to report their figures are optimistic about the months ahead. Many saw better sales in September compared to the previous year.

Analysts predict that total sales volume for the year will be 14 million vehicles, compared to 17 million in 2019. It could take until the end of 2021 for the numbers to fully recover.

Investors today can consider some of the bargain auto stocks to take advantage of what will be a slow but very likely recovery. Ford (NYSE: F), GM (NYSE: GM), and Toyota (NYSE: TM) are all trading below their 52-week peaks, suggesting that now is an opportunity to buy low.

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