By Julia Horowitz, CNN Business
Car sales at major automakers are plunging due to a shortage of computer chips that’s forced factory shutdowns and crimped supply.
But that’s not fazing Wall Street, which remains laser-focused on investment in electric vehicles that could power future growth.
General Motors, Chrysler-owner Stellantis and Honda all recently said that sales fell sharply over the past three months due to supply chain disruption. The latest update from Ford is due Monday.
“The enduring nature of the microchip shortage and port congestion issues continue to constrain the entire industry,” Honda executive Dave Gardner said in a statement.
Carmakers say demand for vehicles remains strong, even as prices have hit record highs. The average new vehicle in the United States sold for $43,355 in August, according to Kelley Blue Book. That’s up 10% from one year ago.
“Underlying demand conditions remain strong, thanks to ample job openings, growing pent-up vehicle demand and excess savings accumulated by many households during the pandemic,” GM chief economist Elaine Buckberg said.
Yet automakers have had to idle plants for months as they scramble to secure necessary parts, a problem they’d hoped would be behind them by now. That’s weighed on deliveries.
Investors are doing their best to look beyond recent developments. GM’s shares rose almost 8% in September, while Ford climbed nearly 9%. The First Trust Nasdaq Global Auto Index Fund, which tracks the sector, pulled back over the past two months, but remains almost 12% higher this year after rallying 53% in 2020.
Why? Call it faith in the future of the electric car.
Last week, Ford announced that it was investing $7 billion to build two enormous manufacturing campuses in Kentucky and Tennessee for electric vehicles. GM, which has a presentation for investors scheduled later this week, is also expected to hammer home its electric vehicle strategy (despite a recall of its Chevy Bolt to address fire-prone battery cells).
Tesla, the ultimate electric vehicle bellwether, has also dealt with supply chain problems. But there’s no sales slump in sight. The automaker said Saturday that it delivered 241,300 vehicles last quarter, a more than 70% increase from one year ago.
“With the chip shortage a major overhang on the auto space and logistical issues globally, these delivery numbers were ‘eye popping,'” Wedbush Securities analysts Daniel Ives and John Katsingris said in a research note. Tesla’s deliveries reveal “quite robust” demand for electric vehicles heading into the end of 2021 and next year, they added.
Big picture: By the end of 2020, there were 10 million electric cars on the road globally, according to the International Energy Agency. That number could rise to almost 145 million by 2030, if governments follow through on plans to boost adoption.
Automakers are scrambling to lead that transition, while Wall Street is betting that it will trigger a windfall. But that requires looking past current conditions, which remain extremely difficult for most companies.
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