The 1.27 million new vehicle inventory is the highest level since June 2021. According to BofA Securities, this translates into a days’ supply (DS) of 29DS, which is ~37% below the five-year average of 47DS and up from 27DS in July. The magnitude of the inventory shortage serves as a reminder of the challenges and hurdles faced globally by the automotive companies and their suppliers, impacting consumers and businesses across the eco-system. New technologies, safety systems, and new powertrains are just a few of the many drivers of the sustained demand. We believe the secular growth outlook over the mid to long-term in the mobility theme remains very attractive for auto-related holdings. Areas such as advanced driver-assistance systems (ADAS) and electrification remain places for potential above average growth over the mid to long term. ADAS content and functionality per vehicle continues to increase in key markets, as does the underlying secular shift to vehicle electrification, which remains a key focus for Europe and China due to emission policies and regulation.
During August, the US seasonally adjusted annual rate (SAAR) was 13.4 million, which was relatively flat compared to July’s 13.5 million. These levels are what is typically seen in a recession, but the supply chain has meant shortages of vehicles. We continue to believe demand remains above supply. Looking at 2022, we believe it could achieve growth of 10 to 15% year-on-year, assuming there is not a consumer recession. Inventory restocking could accelerate as supply-chain bottlenecks ease.
Similar to the US market, Western Europe could be attractive once production normalizes. However, the Ukraine-Russia conflict is a material risk to the macroeconomic outlook in Europe. There is also the risk of energy rationing in Western Europe, particularly in Germany, due to the risk of lower Russian natural gas supplies. This may negatively affect many industries that are energy intensive such as steel, chemicals, and to lesser extent the auto industry.
Newton Mobility Team
All investments involve some level of risk, including loss of principal. Certain investments have specific or unique risks. Any views and opinions are those of the investment manager, unless otherwise noted and is not investment advice.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others.
This material has been provided for informational purposes only and should not be construed as tax advice, investment advice or a recommendation of any particular investment product, strategy, investment manager or account arrangement, and should not serve as a primary basis for investment decisions. Prospective investors should consult a legal, tax or financial professional in order to determine whether any investment product, strategy or service is appropriate for their particular circumstances. Views expressed are those of the author stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change.
This information contains projections or other forward-looking statements regarding future events, targets or expectations, and is only current as of the date indicated. There is no assurance that such events or expectations will be achieved, and actual results may be significantly different from that shown here. The information is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be and should not be interpreted as recommendations. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
BNY Mellon Investment Management is one of the world’s leading investment management organizations, encompassing BNY Mellon’s affiliated investment management firms and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the corporation as a whole or its various subsidiaries generally.
“Newton” and/or the “Newton Investment Management” brand refers to the following group of affiliated companies: Newton Investment Management Limited (NIM) and Newton Investment Management North America LLC (NIMNA). NIM is incorporated in the United Kingdom (Registered in England no. 1371973) and is authorized and regulated by the Financial Conduct Authority in the conduct of investment business. Both Newton firms are registered with the Securities and Exchange Commission (SEC) in the United States of America as an investment adviser under the Investment Advisers Act of 1940. Newton is a subsidiary of The Bank of New York Mellon Corporation. Newton’s investment advisory businesses are described in their Form ADVs, Part 1 and 2, which can be obtained from the SEC.gov website or obtained upon request.
No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.