By: Larry MacDonald
If you are a value investor, you might want to divert your attention away from stocks for awhile and check out the bargains in the showrooms of the nation’s car dealers. Thanks to one of severest recessions in decades, car sales are in free fall and car makers/dealers are responding with substantial sales incentives.
The pressure to discount prices has only intensified in recent weeks as uncertainty over the future of General Motors and Chrysler scares away even more customers. In April, as the Financial Times of London reports, GM sales dropped -34% on a year-over-year basis, while those at Chrysler dived by -48%. Ford, unencumbered by insolvency fears, had better sales and may not be as hungry to generate sales.
Other car makers are suffering too — for different reasons. Toyota’s sales tumbled -42% due, in part, to a collapse in demand for the Prius hybrid (hit by the slide in gas price). Other weak spots (where good deals may surface) include BMW cars (-38%), Nissan’s Infiniti (-48%), Toyota’s Lexus -39%), and Daimler Smart car (-50%).
After you buy your new car and return to focusing on stocks, you might want to zero in on auto stocks. Pent-up demand is building for cars and the recent steep declines in auto sales puts more pressure on legislators to introduce incentives like auto trade-in rebates.
2 Responses to “ Bargains in the showrooms ”
KEEPING THE SAME MODELS YEAR AFTER YEAR.
Why don’t the car manufacturers get back to the basics, and only have each model of car that stays more or less the same year after year? Like the old Volkswagon beetles were for years and years. Save a lot of money for the consumer (cheaper parts) and – well, I suppose the car makers wouldn’t make much on the parts market. But there would be a huge attraction from the cost-conscious consumers.
By Pacific on May 8, 2009