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Why the Automotive Holdings Group share price is crashing today

Talk about a Christmas crash! The Automotive Holdings Group Ltd (ASX: AHG) share price tumbled lower to be the worst performing stock on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) this morning.

What’s more, it may not even be the company’s fault that sparked the 4.3% reversal in AHG’s share price to $1.42 when the ASX 200 is hovering around breakeven during this shorten Christmas eve trading session.

Fingers are pointing at a profit warning by its peer Autosports Group Ltd (ASX: ASG), which revealed it will take a $3 million hit to its first half earnings before interest, tax, depreciation and amortisation (EBITDA).

The irony is that the illiquid ASG share price is untraded at the time of writing. The lack of panic signals that the bad news was anticipated and factored into its record low share price.

On the other hand, fellow car dealer AP Eagers Ltd’s (ASX: APE) share price has managed to chalk up a 0.5% gain to $5.73 while online auto classifieds Carsales.Com Ltd’s (ASX: CAR) share price slipped 0.4% into the red at $10.69.

If the slump in the housing market wasn’t enough of a drag on the sale of luxury cars, the devasting Sydney hailstorm and stricter quarantine rules are new headaches that Autoports must deal with.

“The quarantine issues have arisen as a result of heightened surveillance by the DAWR (Department of Agriculture and Water Resources) upon the discovery of the Brown Maromated Stink Bug on several transport vessels,” said Autosports in a statement to the ASX this morning.

“This impact is likely to be temporary but will affect customer deliveries through December. The affected brands include Audi, Mercedes Benz, BMW, Volkswagen and Volvo.”

The storm that hit our largest city on December 20 has also been blamed for the profit warning as vehicles were damaged from hail.

This has led to delays in the delivery of vehicles that were scheduled this month.

It’s a case of guilt by association as the market is anticipating bad news from Automotive Holdings. It’s not a great way to end the year as ASX-listed automotive dealers are among the worst performing stocks this calendar year.

The outlook is unlikely to improve much for most of 2019 as our housing market is unlikely to recover until 2020.

Falling property prices have a negative effect on household wealth and affects consumer sentiment. Households are reluctant to spend on big ticket discretionary items when the value of their homes (often their largest asset) is falling.

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Automotive Holdings Group Limited and carsales.com Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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