Business

February U.S. auto sales stronger than expected – Automotive News

Published

2 years ago

March 4, 2023

The pace of new-vehicle sales improved in February compared with a year ago as previously sidelined demand — including that from fleet customers — kept transaction prices high and incentives low, even as inventory shortages eased.

Yet, as the industry continues to bounce along as it has for months with strong fundamentals that should portend continued high profitability, the first signs of a slight reversion to more historically normal conditions are appearing, analysts said.

Results were split in February among automakers reporting their sales, with Ford Motor Co. and Hyundai-Kia posting double-digit gains, led by Ford’s 22 percent jump. Meanwhile Mazda North America, Subaru of America and Volvo Car USA also posted sales increases last month, while sales fell 2.4 percent at Toyota Motor North America, despite the first year-over-year increase at Lexus since January 2022.

Data firm Motor Intelligence estimated February’s seasonally adjusted, annualized sales rate at 15.19 million, up from 13.96 million a year ago. January’s rate was 16.21 million. LMC Automotive said industrywide February sales rose 9.5 percent over a year ago to 1.14 million vehicles, including automakers that won’t report sales until the end of the quarter. February’s showing, along with continued demand from fleet customers, convinced LMC to raise its outlook for U.S. sales in 2023 to 15 million, up from 14.9 million.

“There was a bit of a surprise on the upside; the industry did a little better than expected,” said Jeff Schuster, executive vice president for automotive at GlobalData, parent of LMC Automotive. “Still, a 15 million SAAR isn’t lighting the world on fire.”

The supplier disruptions that so vexed the industry last year “are still there, but they’re down considerably from where they were,” Schuster said. He also noted that strong fleet demand is more than making up for any softening consumer demand at the retail level.

“As we saw in January, things are still gaining steam and we’re seeing availability increasing”as inventory levels recover, said Tyson Jominy, vice president of data and analytics at J.D. Power.

“Demand remains very strong. Transaction prices set a record for February — up another 5 percent to over $46,000,” Jominy said.

Dealers are still able to maintain their pricing power, he added, albeit in a modestly reduced form. He noted that in February about 31 percent of retail sales were above sticker price, indicating that strong consumer demand continues to outpace supply. However, that figure is about half of what it was over the summer, he said. “Automakers aren’t going to start incentivizing sales until that number gets a lot closer to zero, or at least in single digits. So things are going the right way, but they’re still not there.”

Indeed, J.D. Power put February’s average incentive per new vehicle at $1,335 in February, up from $1,275 a year earlier, while incentive spending as a percentage of average sticker was nearly flat year-over-year at 2.8 percent, down 0.1 percentage point. TrueCar estimates incentives fell by $135 from February 2022 to $1,522 last month but rose 9 percent from January’s $1,396 level.

Schuster said he expects incentives to rise slowly this year as manufacturers walk a fine line trying to balance their factory utilization rates while avoiding overloading dealers with inventory.

“I think we will start to see incentives creep back in, but it may take a few months,” Schuster said. “We’re going to see a little more balancing from automakers and the discipline holding to not overbuild. But that balancing means that the manufacturers are likely to start enticing consumers to come back in; I don’t think it’s tomorrow, but certainly within the next six months.”

The industry in North America is running at about a 65 percent factory utilization rate based on current sales levels, which means factories are not running as efficiently as they can, Schuster said. Automakers may feel pressure to “open the valves on production” to maximize profits while demand for both retail and fleet is still high and pricing is holding. The problem for automakers is that North American factory capacity is 23.4 million, including some necessary redundancy caused by the ongoing transition to battery-electric vehicles, while the market — at least at its most profitable level — is about 15 million, Schuster said.

“It appears, at least as of now, that everyone is willing to accept a smaller overall [new-vehicle] market” to keep profits strong for as long as possible, Schuster said. “It suggests that the automotive world is different now. Some of the trends that were accelerated by the pandemic have validated the model that you can be really profitable on lower volumes, and that’s OK.”

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Business

Japan’s SoftBank returns to profit after gains at Vision Fund and other investments

Published

3 days ago

November 12, 2024

Anne Joseph

TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.

Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.

Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).

SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.

The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.

WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.

SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.

SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.

SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.

The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.

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Business

Trump campaign promises unlikely to harm entrepreneurship: Shopify CFO

Published

3 days ago

November 12, 2024

Anne Joseph

Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.

“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.

“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”

Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.

On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.

If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.

These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.

If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.

However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.

He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.

“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.

Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.

The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.

Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.

Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.

Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.

Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.

Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”

In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.

“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.

This report by The Canadian Press was first published Nov. 12, 2024.

Companies in this story: (TSX:SHOP)

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Business

RioCan cuts nearly 10 per cent staff in efficiency push as condo market slows

Published

3 days ago

November 12, 2024

Anne Joseph

TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.

The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.

The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.

RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.

The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.

RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.

This report by The Canadian Press was first published Nov. 12, 2024.

Companies in this story: (TSX:REI.UN)

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