Why Shrinking Auto Inventories Are No Problem for Ally Bank
The coronavirus pandemic and related shutdowns have had far-reaching impacts. Not only has it affected us on a personal level, but businesses have seen disruptions in their supply chains -- throwing off manufacturing and production processes. One area that has felt the effects from disruptions is the auto industry.
Vehicle inventory levels have hit record lows. Issues with semiconductor chips, trucking shortages, and other problems have affected auto production levels. This shrinking supply of new vehicles coincides with demand for vehicles ramping up as we emerge from the pandemic. As a result, used car values have been on the rise.
Falling inventories are generally bad for a bank like Ally Financial (NYSE: ALLY), a leading provider of automotive loans and other consumer loans. However, the bank performed quite well in the first quarter this year, helped by rising used car values. Strong demand pushed originations in its auto finance segment to the highest level in nearly five years, leading to strong revenue growth in the first quarter.
Source Fool.com
