US auto sales volumes have remained stable, backed by robust hybrid demand. 9M24 light vehicle sales volume grew +0.6% y/y despite disrupted sales in Florida, Georgia, South Carolina, North Carolina, and Tennessee due to Hurricane Helene in Sep-24. Hybrid demand remains a bright spot in recent months, expanding its market share to 10% in 2Q24 (from 8.6% in 1Q24), compared to the slowing EV market with its flattish market share of 7%. Japanese automakers are major beneficiaries of the US’ burgeoning hybrid demand, with 9M24 sales growth rates ahead of its US peers (see Figure 1).
The US Presidential Election and ongoing US-China trade war present near-term uncertainties for US automakers. With Donald Trump being a vocal opponent against EVs, a Trump presidency could result in a setback for the US EV industry via a potential watering-down of (i) emission rules and/or (ii) Inflation Reduction Act (IRA) EV purchase tax credit (of up to USD7,500), which would negatively impact EV players. The ongoing US-China trade war is another headwind to watch, with the US Commerce Department’s latest proposal to ban Chinese vehicles and ‘connected car’ technology from US roads due to national security concerns. Given that “any vehicles that is manufactured in China would likely fall under the prohibitions”, according to the regulator, automakers that export cars out of China for sale in the US may see some impact.
Prefer Japanese automakers for hybrid-led growth and localised US manufacturing exposure. In view of the current uncertainties that lie ahead for US automakers, we recommend investors position themselves in Japanese automakers, due to their strategic advantage rising from a diverse product portfolio and localised US production, supported by the fact that North America accounts for >50% of their overall revenue. Furthermore, Japanese automakers offer a broad product line-up across ICE, hybrid and EVs, which makes them more resilient towards any changes in US emission rules and/or IRA EV tax credits. Their significant investments in US manufacturing will also mitigate the impact of the US-China trade war.
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