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MarketScreener Homepage  >  Equities  >  Tokyo Stock Exchange  >  Toyota Motor Corporation    7203   JP3633400001

TOYOTA MOTOR CORPORATION

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Auto Deals Dwindle as Sales Rise -- WSJ

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06/04/2020 | 02:48am EDT

Production shutdown during pandemic leaves supply short and lessens need to discount

By Mike Colias and Ben Foldy 

As the U.S. auto business restarts, car buyers returning to showrooms are likely to confront a frustrating reality: slimmer pickings and fewer deals on the new-car lot.

Many dealerships are running low on some of their most popular vehicles, after sales of cars in some parts of the country fared better than expected amid Covid-19 lockdowns, say industry executives, analysts and auto retailers, and that is leading to fewer vehicles to sell and less need to discount them.

Car companies are slowly ramping up production at U.S. factories following an industrywide shutdown lasting nearly two months. But restoring full output is expected to take several weeks, and dealers say that won't be fast enough to replenish stocks before the summer-selling season.

"We've finally been selling cars again, and now we're going to run out," said Gordie Stewart, a Toyota dealer near Birmingham, Ala. He has about 200 vehicles on his lot, down from about 550 normally at this time, and worries his inventory of Toyota Motor Corp.'s mainstay SUVs, such as the Rav4 and Highlander, will soon evaporate.

U.S. auto sales showed signs of recovery in May as many dealerships reopened and states rescinded lockdown orders. Car companies sold roughly 1.1 million vehicles last month, down 30% compared with May 2019, but an improvement from April, when sales dropped nearly 50% over the prior-year period, according to industry research firm Wards Intelligence.

A surge in people returning leased vehicles -- many of whom were granted extensions because their leases expired during lockdowns -- will also flood showrooms in the coming weeks, further boosting demand.

The pandemic, which has upended supply chains and brought manufacturing lines to a halt, has led many businesses to limit options in recent months. Customers accustomed to a wide selection are now having to adjust decisions on everything from staples like meat and toilet paper to big-ticket purchases like homes and cars.

Auto makers have trod a delicate balance since the pandemic hit. With consumer demand crashing, car companies offered deep discounts and promotions early in the health crisis, which helped sales of new vehicles -- especially pickup trucks -- hold up better than many analysts had predicted.

Many dealerships also shifted to online sales, a previously uncommon practice that has grown in popularity and helped lift business while customers were stuck at home. But now, the supply crunch is limiting selection for buyers and leading to a pullback on big incentives, such as the zero-interest, seven-year loans that became prevalent this spring, analysts and industry executives say.

Ford Motor Co.'s U.S. sales chief, Mark LaNeve, said Tuesday that auto-industry spending on discounts and sales promotions moderated in May and is likely to drop further in June as inventories get thinner.

"On certain vehicle lines, we're starting to feel the pinch," he said, referring to the Ford Ranger pickup and Explorer and Escape SUVs.

Overall, new-vehicle U.S. inventory fell 32% in May, to about 2.6 million vehicles on dealer lots, the lowest in recent years, according to data from researcher Motor Intelligence. Stocks are expected to remain around that level this month as auto makers strain to lift production, with shortages more severe on certain models and in some markets, research firm J.D. Power says. "Consumers are going to be forced to compromise," said Thomas King, J.D. Power's head of analytics.

Among the vehicles in the shortest supply are the big, pricey pickup trucks that have long juiced profits for Ford, General Motors Co. and Fiat Chrysler Automobiles NV.

Barclays, in a research note Monday, warned of a "critical risk of supply shortages" of large pickups, estimating dealers had only about 44 days of inventory before running out of popular models, such as the Ford F-150 and GM's Chevrolet Silverado. That is about half the truck stock they had a year earlier.

The inventory crunch adds another challenge to the auto industry's recovery efforts. High unemployment and tightening credit also are expected to dent the U.S. car business this year, after an unprecedented stretch of five years in which U.S. vehicle sales topped 17 million. Sales are expected to sink by more than 25% this year, to around 12.7 million, according to IHS Markit.

More lenders tightened their standards for auto loans last quarter than in any quarter since at least 2011, according to survey data collected by the Federal Reserve. Borrowers with credit scores below 660 accounted for 16% of new retail sales in May, down from 21% in March, according to J.D. Power data.

For now, auto factories that have been slowly increasing output since mid-May are struggling to meet even depressed demand and have prioritized output of pickup trucks, executives have said. Dealers say vehicles typically take more than a month to hit stores from when they roll off the assembly line.

Brad Sowers, a Chevrolet dealer with several stores in Missouri, said his main St. Louis-area store has about 100 Silverado pickups versus 400 normally. The largest, most popular versions of the trucks have almost run out.

"We'll be out of Silverados sometime in June," he said.

GM on Monday brought back thousands of workers at its two large-pickup factories in the U.S. as the auto maker works to resume round-the-clock output, up from eight-hour shifts over the past two weeks. It also will run its plants through its traditional two-week factory shutdown this summer to make up for lost output, a spokesman said.

The pandemic fallout also has tripped up some high-profile vehicle rollouts, including a new version of the Chevrolet Corvette. Stingray Chevrolet near Orlando, a major Corvette dealer, sold about a dozen of the new models before the pandemic, but now has none, dealer Steve Hurley said.

Some auto shoppers say popular models are difficult to find. Jacob Walla, a 27-year-old psychology student in Bryan, Texas, has called dealers across the state looking for a Kia Telluride SUV, but finding one with the features he and his husband want has been nearly impossible. "We didn't want to pay the price we were going to pay for fewer features," he said. "It's just hard to swallow."

Kia Motors Corp. is working to increase production for the Telluride after the Georgia factory where it is assembled was closed by the pandemic, a company spokesman said.

Mr. Walla said the couple is considering placing a custom factory order. They were told not to expect delivery until October at the earliest, he said.

Corrections & Amplifications IHS Markit said U.S. vehicle sales are expected to sink by more than 25% this year. An earlier version of this article incorrectly said that IHS Automotive provided the figures. (Corrected on June 3.)

Write to Mike Colias at Mike.Colias@wsj.com and Ben Foldy at Ben.Foldy@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
BARCLAYS PLC -2.76% 108.4 Delayed Quote.-37.93%
FEEDER CATTLE?FUTURES (GF) - CMG (ELECTRONIC)/C1 0.65% 146.2 End-of-day quote.-0.57%
FIAT CHRYSLER AUTOMOBILES N.V. -1.42% 9.765 Delayed Quote.-24.92%
FORD MOTOR COMPANY 0.14% 7.12 Delayed Quote.-23.55%
GENERAL MOTORS COMPANY -0.37% 27.925 Delayed Quote.-23.42%
IHS MARKIT LTD. 0.62% 83.76 Delayed Quote.10.48%
KIA MOTORS CORPORATION -0.77% 44900 End-of-day quote.1.35%
LINE CORPORATION -0.18% 5410 End-of-day quote.1.12%
LIVE CATTLE (LE) - CMG (ELECTRONIC)/C1 0.12% 106.475 End-of-day quote.-14.72%
RISE, INC. -3.45% 28 End-of-day quote.-6.67%
STINGRAY GROUP INC. 1.30% 5.47 Delayed Quote.-24.37%
THE NEW HOME COMPANY INC. 1.56% 3.91 Delayed Quote.-17.38%
TOYOTA INDUSTRIES CORPORATION 1.64% 6180 End-of-day quote.-2.37%
TOYOTA MOTOR CORPORATION 0.57% 7285 End-of-day quote.-5.56%
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Financials
Sales 2021 24 396 B 228 B 228 B
Net income 2021 1 072 B 10 037 M 10 037 M
Net Debt 2021 10 353 B 96 903 M 96 903 M
P/E ratio 2021 19,3x
Yield 2021 2,21%
Capitalization 20 369 B 190 B 191 B
EV / Sales 2021 1,26x
EV / Sales 2022 1,08x
Nbr of Employees 359 542
Free-Float 62,7%
Chart TOYOTA MOTOR CORPORATION
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Technical analysis trends TOYOTA MOTOR CORPORATION
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Income Statement Evolution
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Mean consensus OUTPERFORM
Number of Analysts 21
Average target price 7 538,42 JPY
Last Close Price 7 285,00 JPY
Spread / Highest target 29,0%
Spread / Average Target 3,48%
Spread / Lowest Target -27,2%
EPS Revisions
Managers
NameTitle
Akio Toyoda President, CEO & Representative Director
Takeshi Uchiyamada Chairman
Kenta Kon Chief Financial Officer
Seiji Sakai Manager-Information Systems & IT Management
Masahito Maeda Chief Technology Officer
Sector and Competitors
1st jan.Capitalization (M$)
TOYOTA MOTOR CORPORATION-5.56%189 413
VOLKSWAGEN AG-20.19%87 687
DAIMLER AG-13.67%53 870
BMW AG-19.51%45 123
HONDA MOTOR CO., LTD.-10.84%44 502
GENERAL MOTORS COMPANY-23.42%40 114