Automakers are likely to report improved results for the third quarter of one of the toughest years in their history, with rebounding demand for premium and electrified cars shielding manufacturers prominent in those segments from the full force of the unfolding economic downturn.
S&P Capital IQ mean consensus analyst estimates show that after a horrendous second quarter blighted by lockdowns that kept both consumers and car factory workers at home, most automakers are expected to return to profit, albeit at a lower level than in the year-ago period.
Tesla Inc. is again projected to have performed strongly, helped by its direct-to-consumer sales model, increased interest in electric cars and its fast-growing market share in China. The most notable outlier to this trend is Nissan Motor Co. Ltd., which analysts expect to post a ¥140.07 billion loss, versus a ¥30.00 billion profit a year prior.
"What we're seeing since the second quarter ... is these auto names have rallied pretty well. In fact, the stocks have probably outperformed the market," said Tom Narayan, senior European auto analyst at RBC Capital Markets.
A geographic split in carmakers' fortunes since coronavirus lockdowns is persisting. China, the world's largest car market, posted double-digit year-over-year sales increases in July, August and September. The big three U.S. automakers, General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV, all outperformed the S&P 500 during the third quarter. Sales in many European countries have benefitted from stimulus measures, though some of those are now being scaled back.
"I would say that there is no 'overall picture,'" said Christoph Sturmer, global lead analyst at PwC Autofacts. "The market is going in all kinds of directions and it's really a question of what your exposure is to each of those sub-trends that determine where you are in the play. Some are getting a massive recovery and some are still deep in a hole. It's really a question of individual exposure."
Sturmer said there had been an "explosion" in demand for electric cars in Europe, with some models such as the new Volkswagen AG ID.3 and forthcoming ID.4 sold out for the time being. Some high-end manufacturers had witnessed the same. Bayerische Motoren Werke AG reported a 46.6% year-over-year increase in sales of electrified vehicles for the third quarter, while Porsche's all-electric Taycan variant was reported to be the fastest-selling sports car in the U.S. during the period.
However, the growing likelihood of tighter restrictions on movement, already being witnessed in Europe as the spread of coronavirus infections speeds up once again, could mean that the third quarter is as good as it gets for automakers in 2020, Narayan cautioned. Pent-up demand late in the second quarter, which spurred sales immediately after lockdowns ended, may also have detracted somewhat from third-quarter revenues.
Both analysts said the pick-up in sales figures, many of which were a result of manufacturers clearing preexisting inventories, masks a more chaotic picture on the industrial side. Supply chain friction resulting from lockdowns early in the year have still not been fully overcome, while the resulting financial fragility of some suppliers remains a major risk for automakers.
"The overall industry, meaning building cars and buying parts from suppliers, is still lagging behind. The market recovery is still, and it may be a false dawn, stronger than the industry recovery," Sturmer said.
The analysts said year-on-year comparisons for August and September are also difficult to extract trends from, not least because last year's figures were distorted by a deadline for compliance with a further phase of WLTP emissions testing standards. Some automakers pre-registered unsold cars in August 2019 to work around a September deadline, causing a statistical dip in the latter month. September is usually one of the strongest months of the year for car sales.
Even factoring in that one-off 2019 blip, passenger car sales in the U.K. fell 4.4%, making for the worst September since 1999 and compounding the woes of the industry, which has been on tenterhooks over the prospect of trade tariffs in the event of a departure from the European Union without free trade provisions.
With the premium and electric segment growing this year, an overall estimated 15%-20% downturn in global sales means conventional fuel types will be hit harder than those headline estimates, Sturmer said. Diesel stands to suffer the most as fleet buyers who have historically favored this powertrain opt for plug-in hybrids that are benefitting from tax incentives in several countries, he added.
As of Oct. 13, US$1 was equivalent to ¥105.55.