Ally Tumbles After Auto-Lending Giant Reports Slowing Loans

(Bloomberg) — The clouds over the US car industry darkened further on Wednesday after auto-lending giant Ally Financial Inc.’s disappointing third-quarter results showed fewer people than expected took out new loans to buy vehicles.

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Ally’s shares nosedived on the results, closing down 7.9% in New York. General Motors Co. and dealers Carvana Co. and CarMax Inc. also fell.

“Ally is among the largest auto lenders in the country — if credit is cracking, this is just the latest giant red flag for the whole auto complex,” the Vital Knowledge newsletter wrote.

Investor sentiment on autos has been on tenterhooks in recent weeks after Ford Motor Co. sounded a major alarm last month, saying costs were soaring due to inflation. That was closely followed by a big profit miss from CarMax, which said the ability of potential buyers to afford vehicles has become a challenge, with rising interest rates and low consumer confidence. Earlier on Wednesday, another auto dealer, Lithia & Driveway, reported third-quarter earnings below expectations.

The automotive industry overall has been battling several issues this year, including supply-chain shortages, rising raw material costs, a wary consumer and disruptions from the ongoing shift to electric from gas-powered cars. This is reflected in the stocks’ terrible run.

The S&P Supercomposite Automobiles & Components Industry Index has declined nearly 38% this year, compared with the S&P 500 Index’s 22% drop.

(Updates stock moves in second and sixth paragraphs.)