April 26, 2023
Although I am not a professional auto analyst, and this is in no way investment advice, I continue to believe the Auto Sector, of GM ( ), F( ) and TSLA ( ) could be a sink hole for investors in 2023.
On Tuesday, General Motors (GM) reported an 18.5 percent drop in profits in the first quarter, mainly because of job cuts, and slowing new vehicle sales in China, according to the New York Times.
Sales in China were down significantly, because Chinese buyers are primarily interested in electric cars, and GM, has only one, the Chevrolet Bolt compact. The Bolt is competing against a broad range of Chinese Branded offerings, particularly from BYD. Also, GM plans to discontinue the Chevy Bolt at the end of this model year.
Adding to these concerns, one should consider that rising interest rates, and near record prices, have made it hard for many Americans to afford new cars and trucks. The average monthly payments on new cars last month was $784, up from $683 last year.
While GM’s U.S. sales rose in the first quarter, mostly to Car Rental and other Corporate Buyers, a softening of consumer demand has started to appear. AutoNation, the largest auto retailer in the United States, said its first quarter new car sales fell 2%.
For those who want to look past the current economic problems, the hedge fund manager of ARKK, Cathy Woods has a long term projection of $2,000 per share for TSLA, which she continues to buy for her various ETF’s as it declines in price. Is she right?
I seem to remember the old Wall Street adage: “Don’t try to catch a falling knife.”