Seeking Alpha
Profile| Send Message| ()  

The nightmares continue for automakers as their European operations have been hurting their performance. However, in North America the auto industry is growing as shown by the solid SAAR figures for the month of September. The decline has accelerated as September registrations in Europe were down 10.8% YoY, which is greater than the YoY decline of 8.9% in the last month. The YTD registrations were also down 7.6 percent with 9.37 million cars.

The main concern is that the slowdown in the auto industry has engulfed Germany as well which is considered to be the strongest amongst the European economies. In August, the decline in German auto sales was between 4-5%. However, this year the decline reached double figures (-10.9%). UK was the only region to post positive sales figures. France, Italy and Spain all posted significant losses YoY (-17.9%, -25.7% and -36.8%, respectively).

This month's announcement was a shock for investors of the auto industry as Volkswagen (OTCPK:VLKAF), which had earlier been cruising with Audi sales, also saw a decline of 8.4%. Following shows the change in sales YoY:

Manufacturers

YoY Change

VW Group

-8.40%

PSA Group

-9%

RENAULT Group

-29.10%

General Motors (GM)

-16.20%

FORD (F)

-14.90%

FIAT Group (OTCPK:FIATY)

-18.50%

BMW Group

4.10%

DAIMLER

-6.60%

TOYOTA Group (TM)

0.90%

NISSAN (OTCPK:NSANY)

-14.80%

HYUNDAI (OTC:HYMLF)

3.30%

KIA

4.90%

It is interesting to note that only BMW and Korean manufacturers reported a YoY rise in sales. BMW, the world's largest premium carmaker, has been showing strong sales through its flagship BMW brand. A rise of 14% in China is a case in point.

The decline of Detroit pair was also steep. Ford and General Motor's Opel are the second and third largest brands in Europe after VW, respectively.

Market Shares:

The following table shows the current market shares and the MoM change:

Manufacturers

Market Share-Sept

Market Share-Aug

MoM Change

VW Group

23.8%

28.2%

-4.4%

PSA Group

10.9%

11.4%

-0.5%

RENAULT Group

7.0%

8.8%

-1.8%

GM

8.5%

7.6%

0.9%

FORD

8.2%

6.0%

2.2%

FIAT Group

6.0%

5.3%

0.7%

BMW Group

7.4%

5.9%

1.5%

DAIMLER

5.4%

5.5%

-0.1%

TOYOTA Group

4.5%

4.3%

0.2%

NISSAN

3.9%

3.2%

0.7%

HYUNDAI

3.5%

3.7%

-0.2%

KIA

3.1%

3.0%

0.1%

VW saw a sales decline of 14% in its flagship Volkswagen brand. It is interesting to see that sales of all flagship brands of different auto manufacturers declined (except BMW).

Ford:

The rise in market share should send a bullish sign to investors despite a double digit decline in the sales figure on a YoY basis. The company is well placed to bring the One Ford plan in action. Under this plan, the company is expected to launch 15 new vehicles in the next five years. The products will include passenger vehicles, multi-activity vehicles, SUVs and pickups. It is also important to note that despite the horrific decline in sales, Ford's share price hardly moved after the news. This most probably means that the losses from European operations have already been priced in the stock. Given that the stock is trading at a cheap multiple of 6x and offering a dividend yield of 2.23%, it is still recommended as a buy.

General Motors:

GM's market share also improved slightly. The main part of the decline was brought by Chevrolet Marque, which saw a sales decline of 20%. The main Opel and Vauxhall brands posted a 16 percent decline. The company has made $16.8 billion in Europe since 1999. The company has proposed to close a factory in Bochum in Germany in 2016. GM's European operations have already been covered by us and therefore we will not go in much detail.

Despite the increasing losses in European operations, GM is still recommended as a buy given the stable improvement in its margins, restructuring of its operations and introduction of new models like Cadillac XTS.

Source: Buy Ford And GM: Despite Decline In Their European Sales