Car sales fall to lowest since 1956: Are these auto stocks a buy?

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Car sales fall to lowest since 1956: Are these auto stocks a buy?

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 Car sales fall to lowest since 1956: Are these auto stocks a buy?
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Highlights

  • UK’s car production in 2021 dropped by 6.7 per cent to 859,575 units, the lowest since 1956.
  • The drop in production was mostly due to covid-19 related factors such as semiconductor shortage, staff shortages etc.

UK’s car production in 2021 dropped to the lowest levels last seen in 1956, falling by 6.7 per cent to about 859,575 units, according to data released on Thursday by the Society of Motor Manufacturers and Traders (SMMT).

SMMT stated that car output was down by 61,353 units from 2020 (a year which itself had been severely impacted by multiple lockdowns). Moreover, 2021 production was around 34.0 per cent below pre-pandemic levels of 2019.

The sharp fall was due to various factors (mostly directly impacted by covid-related disruptions) such as an acute shortage of semiconductors, staff shortages, etc. However, a major factor, which was not related to the pandemic, was the closing of a major UK car plant in July 2021, which had caused an annual fall of around 25 per cent in production.

Despite the dismal yearly performance, UK car plants made a record number of low or zero-emitting vehicles, making up around 26.1 per cent of all cars produced in 2021.

Amid this development, let us deep-dive into 2 FTSE listed auto stocks and explore their investment scenarios:

  1. Saietta Group PLC (LON: SED)

Saietta is an electric motor designer and maker for EVs. It belongs to the FTSE AIM All-Share index.

The group’s H1 2021 gross profit stood at £437, 000 compared to its gross profits in H1 2020, which was £37,000. It had a gross margin of 55 per cent in H1 2021. And its H1 2021 adjusted EBITDA loss was £1,064 thousand, compared to a loss of £394 thousand in H1 2020.

The group expects the acquisition of E-Traction will help boost Saietta’s performance over previous guidance in the coming years.

SED share price and volume

Image source: Refinitv

The group’s shares ended at GBX 222.50, up by 1.14 per cent on 26 January. The FTSE AIM All-Share index, on the other hand, ended at 1,097.29, higher by 1.21 per cent.

The company’s market cap was at £187.10 million as of 26 January.

  1. TI Fluid Systems PLC (LON: TIFS)

TI Fluid Systems is automotive fluid storage, carrying and delivery systems manufacturer.

The group expects its revenue for the year ended 31 December 2021 to be around EUR 2.95 billion and full-year 2021 adjusted EBIT Margin to be either around or marginally higher than 7 per cent, according to its latest post-close trading update.

It also expects its 2021 revenue growth to be above global light vehicle production by around 300 basis points on a constant currency basis. It is expected to release its FY 2021 results later this year, on 15 March.

TIFS share price and volume

Image source: Refinitv

The group’s shares ended at GBX 239.50, down by 0.21 per cent on 26 January. The FTSE 250 index, on the other hand, ended at 21,873.08, up by 1.05 per cent.

The company’s market cap was at £ 1,248.65 million as of 26 January.

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