The US Automobile Industry is showing strong growth across segments, which is sharp contrast to the Indian Automobile Industry that is showing no growth at all. Hence our focus is on Indian companies that will gain from the strong growth in the US Automobile Industry. Our top picks have given returns of 55% and 20% since recommendation. We continue to focus on domestic auto stocks that will benefit from US Auto sector.
Note on US Automobile Industry Growth
Auto companies in the US are reporting strong sales in 2013. The total passenger cars sales rose 15.5% to 7,51,540 in August 2013 from 6,50,576 in August 2012. The 2013 year to date passenger car sales rose 6.9% to 54,02,347 compared to 2012 year to date sales of 50,55,971. The total light commercial vehicles sales rose 18.4% to 7,51,611 in August 2013 from 6,34,626 in August 2012. The 2013 year to date light commercial vehicle sales rose 12.7% to 52,45,139 compared to 2012 year to date sales of 46,55,073. The total sales rose 17% to 15,03,151 in August 2013 from 12,85,202 in August 2012. The 2013 year to date total sales rose 9.6% to 106,47,486 compared to 2012 year to date sales of 97,11,044.
The Dow Jones US Auto Manufacturers Index rose 70% in the last one year from September 2012 to September 2013 and the Dow Jones Industrial Average rose 15% in the same period. General Motors stock rose 83.54% and Ford rose 67.85% in the same period.
General Motors saw an increase of 14.7% in unit sales to 2,75,000 vehicles in the month of August 2013 from 2,40,000 vehicles sold in August 2012. The year to date 2013 sales rose 9.8% to 19,30,264 vehicles from 17,57,470 for the year to date in 2012.
Ford saw an increase of 12% in unit sales to 2,20,404 vehicles in the month of August 2013 from 1,96,749 vehicles sold in August 2012. The year to date 2013 sales rose 12.8% to 17,03,220 vehicles from 15,10,614 for the year to date in 2012.
Chrysler saw an increase of 11.5% in unit sales to 1,65,552 vehicles in the month of August 2013 from 1,48,472 vehicles sold in August 2012. The year to date 2013 sales rose 9.5% to 12,13,986 vehicles from 11,08,629 for the year to date in 2012.
Jaguar Land Rover, the UK’s leading manufacturer of premium luxury vehicles owned by Tata Motors sold 27,852 vehicles in the month of August 2013 its best ever sales performance with an increase of 28% versus the same period last year. During the first eight months of the year 2013 Jaguar Land Rover sold 2,69,653 vehicles with a 16% year on year growth.
Jaguar Land Rover North America reported August 2013 U.S. sales: Jaguar sales were 1,723 units, 67% up from 1,029 units in August 2012; Land Rover sales were 4,938 units, 32% up from 3,727 units in August 2012. Jaguar Land Rover North America August U.S. sales for both brands hit 6,661 units, a 40 % increase from 4,756 in August 2012.
The Automobile industry is one of the most important industries and economic sectors in the United States. It contributes 3.5% to the overall Gross Domestic Product (GDP) and employs over 1.7 million people. The total automobile production for the US stood at 10.3 million units in the year 2012, next to China with a production of 19.27 million units. The total turnover for the US automobile industry stood at USD 552 billion with investment being USD 40 billion in the year 2012.
The main companies are General Motors, Ford and Chrysler with foreign competitors Toyota, Honda, Hyundai and Nissan. In October 2012 the market share included Toyota (15.6%), General Motors (15.3%), Ford (12%), Hyundai-Kia (11.4%) and Honda (8.5%). The competition is intense with an oligopolistic market structure and profitability remains low due to the costs associated with competition. Most companies experience higher sales during the second quarter from April to June and sales tend to be sluggish between November to January.