Insights into the US Auto Industry’s Recovery and Challenge

The US auto industry is seeing improvements after the chip shortage, with production increasing and inventory levels rising.

While this may lead to more discounting, the industry has room for this without harming profitability, as current incentive levels are low.

Sales are expected to rise in 2024, though uncertainties remain, such as the lingering chip shortage effects and economic factors like inflation and the presidential election.

General Motors (GM) stock is viewed as undervalued, but risks exist, particularly with a more assertive United Auto Workers union. GM’s investments in electric vehicles and autonomous driving are seen positively, with management’s confidence reflected in a share repurchase program.

However, the 2028 UAW strike could be disruptive, especially regarding pension and healthcare benefits. This, along with other uncertainties, makes GM less of a high-conviction investment, although it remains appealing for patient investors.

The industry is recovering but faces challenges. The focus on electric vehicles and new technologies offers growth potential, but factors like the chip shortage, economic conditions, and labor relations could impact the industry’s trajectory.