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Government Shutdown Benefits Auto Sales

In the grand scheme of things, putting off a new car purchase by a few months isn't that big of a deal for most drivers. There is no doubt that if 18% of potential car buyers do take a pass on a new ride, that it will negatively affect automakers.

This would be great! A sales miss for the month of October would seem to be the most likely, but what if sales come in soft for November, too? What if earnings sag as a result or guidance is weak because management is unsure about consumers?

For traders, this may be is bad news. For investors, what could be better? If automotive stocks start to miss sales numbers for a few months and possibly have a less-than-favorable earnings result or conference call, we'll finally get a decent pullback in what has been a remarkable sector this year.

So sales could taper off for a few months at the maximum, before causing pent up demand down the road.

Stocks like Ford, General Motors and Toyota Motors (TM - Get Report), which are up 31%, 20% and 39%, respectively, could finally present viable entry points for mid- to long-term investors.

Even BorgWarner (BWA - Get Report) or Johnson Controls (JCI - Get Report), which are up 42% and 36%, respectively, could have a nice pullback.

John Krafcik, CEO of Hyundai Motor Company recently suggested that October sales figures could fall by as much as 10% due to the ongoing saga in D.C.

He said, "It's that anxiety that keeps customers, potential buyers, on the sidelines 5% to 10% this month, compared to where it was in September. I think a lot of it has to do with this shutdown discussion."

If this is true, we can likely expect the automakers and parts suppliers to get whacked in the coming weeks, presenting great buying opportunities.
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BWA $42.78 0.00%
F $14.53 0.00%
GM $36.37 0.00%
JCI $45.70 0.00%
TM $124.37 0.00%


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