Deutsche Bank Discusses U.S. Auto Sales

Deutsche Bank issued a report on U.S. auto sales Tuesday along with current ratings and price targets.

“The October U.S. light vehicle Seasonally Adjusted Annualized Rate (SAAR) came in at 16.3MM (units up 6.0 percent yoy), in-line with our 16.4MM estimate,” according to analyst Rod Lache.

“Overall, demand appears to be tracking in the mid-16’s, with the past two months at 16.3MM (May and August SAARs were in the 16.8 MM range, but benefitted deferrals from the severe winter).

“Low interest rates and lower gas prices are predictably supporting strong mix (large pickups were 13.6 percent of the industry vs. 13.2 percent last October and 13.5 percent last month; Cars decreased to 45.4 percent from 47.0 percent last year),” according to the report.

Lache cautioned that “low fuel prices are something of a double edged sword, given that Automakers are being compelled to add significant fuel economy content, which we believe will add upwards up $1,000 to the average vehicle’s cost over the next 5-years...It is somewhat less clear that consumers will pay for this added content in a low fuel price environment.”

Related Link: Citi Examines The Bear Case Against Ford And General Motors

General Motors - Hold, $39 price target

General Motors Company GM “reported a +0.2 percent increase; below our +3.0 percent estimate. The softness was likely driven by a moderation in incentive spending from high levels in September and tough comparisons for the Large SUVs.”

Lache “noted that GM's large pickup trucks were up 9.8 percent yoy, and the K2XX large truck SAAR was again 1.25M (now the fifth straight month above 1.2M). GM’s share of the large pickup segment fell to 38.0 percent from 40.1 percent in September as they reduced incentives $700 sequentially. But this remains above the ~37 percent market share range from prior to the incentive push.”

Ford - Buy, $16 price target.

Ford Motor Company F “reported October U.S. sales -1.7 percent; above our -2.9 percent estimate. This result was mostly in-line with our expectation as Ford continues to moderate rental fleet sales (though commercial and government sales were actually up 18 percent and 4 percent respectively).

The report also noted that “the F-Series posted an impressive result; down -0.6 percent yoy despite very low incentive levels as the company conserves inventory ahead of the new truck launch. Additionally, Ford’s incentives on the F-Series were down $300 yoy while RPU was up $1,700. Ford’s overall share of 14.4 percent was above the 13.9 percent share that they achieved over the past 2 months, and is about in-line with the 14.5 percent assumption that we’ve made for the remainder of this year.”

General Motors Company recently traded at $30.85, down 1.06 percent.

Ford Motor Company recently traded at $13.90, down 0.68 percent.