Autos Weekly: What Recovery?

It was another interesting week in the global auto business, as General Motors continued its march (back) to the stock market and Ford (NYSE: F  ) shrugged off worries about fleet sales. Here are a few of last week's highlights.

Is this the double dip?
Get ready for some ugly auto sales numbers: According to industry-watchers at both TrueCar.com and Edmunds.com, things are looking grim. TrueCar predicts that August U.S. light-vehicle sales will be down nearly 20% over last year's levels, a major reversal after months of year-over-year increases.

Of course, last August's numbers were inflated by the U.S. government's Cash for Clunkers incentives program, but even when compared to last month, the predictions for August look grim. Only Honda (NYSE: HMC  ) is expected to show month-over-month gains, with Edmunds predicting that Ford's August sales will be down 2.4% from July, and sales at Toyota (NYSE: TM  ) off a sobering 6.2%. Despite the drop, TrueCar expects Ford to gain a bit of market share, largely at the expense of Toyota and General Motors.

Overall, TrueCar expects August sales to be off 3% from July's totals. Edmunds' guess isn't much rosier, forecasting a 1.4% decline. And keep in mind that even 2010's good months have reflected historically low sales rates: A widely watched U.S. auto sales indicator currently suggests that total 2010 sales will be under 12 million, a far cry from the 16 million-17 million that was considered typical as recently as 2007.

This can't be a welcome trend for GM, with its IPO looming. And with new-car sales being a key indicator of consumer spending, it's not looking good on that front, either -- but we'll know for sure when the automakers release official sales figures later this week.

Toyota gets green(er)
Toyota released its latest "Environmental Action Plan" last week, and while there weren't too many surprises, its key points are worth a look:

  • Plug-in hybrids: Green-car enthusiasts have been hoping for a plug-in version of the Prius for some time, and it looks like they might finally get their wish: Toyota said it will introduce its first plug-in hybrid ("PHEV" in industry-speak) by 2012, and expects to sell "tens of thousands" annually. Toyota indicated that this car will be a hybrid with electric drive "for daily use," suggesting an arrangement similar to the upcoming Chevrolet Volt's powertrain, where the gasoline engine is used for recharging rather than propulsion.
  • Battery-powered car: Toyota also expects to sell a fully electric car, one powered entirely by batteries like the Tesla (Nasdaq: TSLA  ) Roadster and Nissan's upcoming Leaf. This car will be marketed for short-distance use and is expected in 2012, though it's not clear (at least to me) whether it'll be sold in the U.S.
  • Regular ol' hybrids: They want to sell a million hybrids a year worldwide. Given the strength of Toyota's hybrids to date, I doubt that'll be a problem.
  • Fuel cells. Toyota hasn't forgotten fuel cells, which convert a fuel -- generally hydrogen -- to electricity with benign emissions and which were once thought to be key to the auto's future. While the automakers and key suppliers like Johnson Controls (NYSE: JCI  ) and Lear (NYSE: LEA  ) have invested heavily in electric and hybrid-electric solutions, Toyota will cover its bases and "develop a next generation FC vehicle and market it for mid-long distance use." Perhaps tellingly, no timetable is given.

BYD walks it back, again
A year ago, China's BYD Auto, the battery-and-auto-maker partly owned by Berkshire Hathaway (NYSE: BRK-B  ) , issued a daring proclamation: It aimed to be no less than the world's No. 1 automaker by 2025. The company had ambitious plans to storm the world's markets, setting up an outpost in Germany and announcing that it would introduce an all-electric car to the U.S. later this year.

To the surprise of approximately nobody, BYD walked that prediction back a wee bit in an interview with China's Global Times last week. The company hasn't come close to meeting its 2010 sales targets, and while it has a long list of semi-plausible explanations for its sales struggles, the overall impression is one of disarray: Dealers have pulled out of agreements, the company is in trouble with China's Ministry of Land Resources over factories that may or may not have been built illegally on farmland, and the much-vaunted (or at least much-hyped) F3DM plug-in hybrid car sold a whopping 18 (yes, 18) units in the first half of 2010.

All eyerolling aside, BYD is still on track to sell some 600,000 cars this year, and expects to follow through on plans to bring its E6 electric sedan to Europe and the U.S. in the near future.

Fool contributor John Rosevear owns shares of Ford. Berkshire Hathaway is a Motley Fool Inside Value recommendation. Berkshire Hathaway and Ford are Motley Fool Stock Advisor choices. The Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 31, 2010, at 7:40 AM, rav55 wrote:

    HEY WAIT A MINUTE YOU GUYS AT THE FOOL DON'T GET IT BOTH WAYS!!

    Rick Smith wrote today in The Fool;

    "Since I write for an investing site, my advice probably won't surprise you: Invest in stocks. According to BEA, one of the few places consumers are still spending is in the auto sector, which accounted for half the increase in consumer spending last month. Sales are soaring at Ford (NYSE: F), and at suppliers Johnson Controls (NYSE: JCI), Lear (NYSE: LEA), and American Axle (NYSE: AXL)."

    Mr. Rich Smith writes this here: http://www.fool.com/investing/general/2010/08/30/picture-of-...

    So which is it? Are sales soaring or are sales in the toilet? You wouldn't be lying to us now would you John Rosevear?

    Or do you all just make this stuff up as you go along because you get paid by the word?

  • Report this Comment On August 31, 2010, at 10:57 AM, rbtrader wrote:

    For the person that drives 15-20 miles per day, I can see a $15,000 electric car. What I don't see is a $40,000-$50,000 electric car with a battery pack that cost 30% to 40% of the overall price. There will be little or no resale value. Put yourself in the buyers position. You are looking to get a second car for the family and you decide to buy a couple of year old electric car for the trip to the grocery store, etc. You see a classified ad for a three year old electric car and talk to the owner about the battery. He says its working well, however he doesn't use take the car more than a few miles at a time, so he can't tell you how far you can go on a charge. Are you going to take the chance that the battery will last for another 4 years before it needs replaced? The car was $45,000 new, and the battery was 40% of the cost, how much are you willing to pay for that car now, since the battery is more than 50% through its life cycle? When this isn't the first thought in your mind, then it will be time to buy an electric car.

  • Report this Comment On August 31, 2010, at 11:05 AM, TMFMarlowe wrote:

    @rav55: I don't get paid by the word. I do get paid to keep an eye on the auto business, and I accurately reported what the experts are saying about current sales trends. Accusing me of lying is a little silly when the article points you to the sources of my info. Check 'em out for yourself.

    In any event, we'll have August's sales results in hand tomorrow afternoon, and that'll tell the tale. Ford, for what it's worth, will probably do better than most (as will Honda), but it's looking like an ugly month. We'll know shortly.

    John Rosevear

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