Breaking

demand is coming back quicker than we thought


The race by car on the part of households to decamp to suburbia from congested cities amidst the COVID-19 pandemic appears to be a tailwind for at least one U.S. auto giant.


“Actually, you know it varies across the globe,” General Motors Chairman and CEO Mary Barra told Yahoo Finance’s The First Trade on current demand trends. “We’re seeing the China market come back as well as the United States and North America in general, a little faster than we thought. I would say we’re cautiously optimistic. There’s a lot that we need to see start going in the right direction. But right now we’re seeing especially retail demand come back more quickly than we expected.”


Barra’s comments come on the heels of it shelling out $2 billion for an 11% stake in electric truck maker Nikola this week. The deal will make it as the lead manufacturer of Nikola’s 906-horsepower Badger pickup truck and supplier of batteries for the upstart’s semi-trucks.


To be sure, the latest data on the broader U.S. auto market is a little bit more mixed than the trends GM is seeing at the moment.


Toyota reported earlier this month that sales in August plunged 23%, marking its fifth straight monthly decline. Sales at Hyundai tanked 8.4%. Even Subaru — which has been riding high on the back of interest in its Outback and Forrester — saw sales fall 17.4%.



Automobiles sit in a parking lot at a Toyota dealership in Chicago, December 22, 2008. Toyota Motor Corp forecast a first-ever annual operating loss, blaming a relentless sales slide and a crippling rise in the yen in what it said was an emergency unprecedented in its 70-year history. REUTERS/Joshua Lott (UNITED STATES)



The savings grace for automakers, as Yahoo Finance sister publication AutoBlog points out, is that transaction prices for new vehicles are up as they pull back on incentives. That should help offset weaker volumes in the near-term.


Nonetheless, the auto industry is likely to have a challenging fall as dealers battle with low inventories (caused by plant shutdowns at the height of the pandemic) and cautious consumers dealing with financial loss and an uncertain presidential election.


“Our initial take on August: The market recovery remains on track. There are headwinds holding back sales — limited inventories, fewer cash incentives – and those likely suppressed some activity as potential buyers could not find what they wanted. The industry is also wrestling with a shortage of MY2021 vehicles, which normally the OEMs would be rolling out at this time of year. The lack of fresh product likely kept some buyers on the sidelines. The inventory situation is going to take some time to improve, and when coupled with an ongoing pandemic and weak economy, vehicle sales could face a difficult period this fall,” said Cox Automotive senior economist Charlie Chesbrough. 


Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.


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