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Detroit Loses Key Foreign Manufacturers As Pickups Dominate

Detroit Loses Key Foreign Manufacturers As Pickups Dominate.

U.S. Market Will Dip But Overall Health Looks Good.

“It’s official. You can’t refer to Detroit as a car show anymore”

The annual Detroit Car Show has lost its lustre as new technology developments have persuaded the big movers and shakers to show off their latest autos at the Consumer Electronics Show days earlier in Las Vegas.

The idea of car shows as important catalysts for buyers has been losing its edge too and Detroit has forfeited its attraction more than most.

The list of Detroit no-shows probably says it all – “Mazda, Porsche, Jaguar, Land Rover, Mini, Aston Martin, Bentley, Ferrari, Maserati, McLaren, Lamborghini, Rolls-Royce and, of course, Tesla,” according to Professor Ferdinand Dudenhoeffer from Germany’s Center for Automotive Research (CAR).

Morgan Stanley analyst Adam Jonas put it this way.

“It’s official. You can’t refer to Detroit as a car show anymore. It’s an applied AI (artificial intelligence) and pickup truck/SUV show. The former should be good for the multiple. The latter should be good for the earnings,” Jonas said.

And the stars of Detroit were vehicles largely unknown in Europe with pickups like the Dodge Ram and Chevrolet Silverado stealing the limelight. Perhaps the North American International Auto Show (NAIAS), to give it its full handle, should remove the “I” word from its name.

Meanwhile, the U.S. industry is in healthy shape although most experts predict a softening of sales from 2017’s 17.1 million.

Cox Automotive forecast U.S. sales of 16.7 million in 2018.

No worries
Chicago investment researcher Morningstar sees a down year too, but not much to worry about.

“The U.S. market will remain healthy but continues its year-over-year declines after peaking in 2016. We look for 2018 to decline from 2017 by about 3 per cent based on increases in used-vehicle supply from the off-lease market and captive finance arms pulling back on leasing,” Morningstar said.

BMI Research also predicted lower sales in 2017, while the show underlined the tough decisions auto makers must take.

“Launches of pickup trucks followed by announcements of massive investments into electric vehicles reflected the fine line carmakers are being forced to tread between preparing for the industry’s future transformation and fulfilling current demand. Financial projections also suggest that this balancing act is already impacting bottom lines,” BMI Research said in a report.

BMI Research pointed out that as the overall market fell slightly in 2017, the pickup truck element grew 4.3 per cent. In 2018 light truck sales will rise 0.5 per cent. It said the carmakers are aware of the long term needs as many markets move towards so-called cleaner transportation.

“Ford, for example, revealed at the show that it has doubled its initial EV investment to $11 billion and plans to offer 24 plug-in hybrids and 16 full EVs in its range by 2022. Carmakers are keen to show the public, and more importantly, shareholders, that they are not being left behind as it becomes clear that the existing business model of building and selling cars is living on borrowed time,” BMI Research said.

Morgan Stanley’s Jonas pointed to factors in 2018 which may suggest the end of the conventional wisdom in the automotive sector is nigh –

The Dyson effect – More signs of encroachment are likely from consumer electronics firms like Dyson and technology ones like Apple. The auto industry is ripe for redefinition as an “electro-driving, mobile supercomputing ecosystem where new firms may have competitive advantage.” Technology companies have the kind of financial clout which dwarfs the traditional auto industry.

Tesla Model 3 – “it is our working assumption that the Model 3 ramp will be successful and may materially change investor perceptions of the traditional industry versus entrants”.

Obsolescence – cars in 3 to 5 years will be so superior in terms of prolusion technology, efficiency, connectivity, safety and automation, why buy a car now?


 

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