The US Auto Industry’s Eventful Ride through 2017

In stock trading it does help to look back and learn some lessons. 2017 revealed some interesting aspects in the auto industry. Some stocks go through quite a bumpy ride - it's hard to predict where the stock would turn next. In 2017, two major players in the US auto industry faced tough realities though they managed to find solutions for them. The industry experienced slight sales decline in the light vehicle category by 1.8% while still being near record highs. The highs are a result of the consistent growth posted by the industry since the most recent recession.

It was a year when General Motors ($GM) had to exit Europe by selling its unprofitable Opel brand to French auto giant Peugeot ($PUGOY) for around $2.3 billion. GM also shifted its focus from passenger cars to more profitable segments such as trucks and SUVs. Europe has been a loss-making division for GM since 1999.

As Motley Fool's Daniel Miller points out, this exit from Europe resulted in GM improving its earnings per share as well as its margins. It has also improved the adjusted return on invested capital and free cash flow. Its capital expenditure requirements have lowered too. Investors loved it, as much as they loved the company's new attitude to only participate in lucrative markets. And, China is one of those very lucrative markets. GM also announced its exit from India, with its factory there only to be used for manufacturing vehicles for export. GM also decided to shed greater focus on General Motors Financial and the transportation as a service industry.

If General Motors was faced with some tough decisions to make, Tesla ($TSLA) had some tough ground realities to deal with in ramping up production of its cheaper, more mass market-oriented Model 3.

The Model 3 was launched with the expectation of capturing greater market share than Tesla's other niche models. With a $35,000 starting price, the Model 3 sedan looked set to make Tesla a mainstream auto manufacturer. The news of the launch ramped up the stock, but then serious concerns emerged as to whether the company would be able to get the Model 3 into total production. These concerns sent the company's stock slumping. But when Tesla later allayed those fears, the stock jumped again.

At the end of it all though, $TSLA stock managed to climb 45.7% at the end of 2017 from the final trading day of 2016, according to this Nasdaq.com article. It closed at $311.35. Despite the rollercoaster ride, Tesla managed to end on a high. It is now on a reset mode with regard to Model 3 production for 2018. It has set a target of 2500 cars per week for its production line by the end of Q1 and then 5000 per week by the end of Q2. Investors will be hoping that Tesla doesn't reset these goals as well, or 2018 would be another rollercoaster ride for this revolutionary Silicon Valley car maker.

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