by Jon LeSage, editor, Used Car Market Reports
Solid recovery from plunging sales in 2009 and financial turmoil in Detroit – and likely from a stable and strong used vehicle market – are driving stock prices for automakers.
Sales could go to 16M units this year as consumers feel better about the economy and want to replace their aging vehicles, and loans and leases are more accessible. Resale values are expected to drop as lease returns increase, but overall prices are expected to remain relatively strong.
Europe may also be stabilizing in its financial markets. Escalating demand in Asia is also help auto stock prices.
General Motors shares have been responding well to the company’s performance with a 57% rise in the past year; Ford has seen a 78% increase; Tesla Motors has seen share prices hit unbelievable high levels, though that has softened since its battery fire story broke.
GM’s recovery has been helping the US Treasury sell off more of its shares – making $570M in recent stock sales means about $36B of its $51B loan has been paid off.
For the rest of this year, investment analyst firm Zacks expects automotive stock value to continue seeing strength in the fourth quarter. While Q3 of 2013 has seen some decline in earnings, that’s expected to be more than offset by an expected 25.8% surge in earnings during Q4. Full year earnings are expected to be around 9% for automakers.
Zacks expects industry revenue to grow by 3.4% in the Q4. It should be one of the very best sectors for stock investors.