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Global Auto Sales Growth Looks Doomed In 2019

Global Auto Sales Growth Looks Doomed In 2019.

“the “fat years” in the automotive industry are over for now”

Global car and SUV sales in 2019 are expected to fall slightly as the world economy stumbles, and the days of easy profits since the financial crisis for the world’s carmakers are coming to an end.

The biggest worry is China, currently the largest auto market in the world, which is not only tottering dangerously from internal economic problems, but is also threatened by a possible trade war with the U.S. Europe’s long run of steady growth is coming to an end in 2019 along with America’s.

Investment bank Morgan Stanley expects global auto sales to slip 0.3% in 2019 to 82.1 million. The Center for Automotive Research in Duisberg-Essen, Germany, puts 2019 sales slightly higher at 82.9 million. Fitch Solutions still expects some growth in sales – a miniscule 2.0%. 

The big carmakers will be hard pressed to make a buck, as spending to finance electric cars, autonomous ones, and new forms of mobility is needed, with the possibility of profit way over the horizon. The carmakers are spooked by the thought that their businesses might disappear overnight as super-rich high technology companies decide to move in.

In Europe there is big government pressure to make combustion engined vehicles more fuel efficient. That promises more spending to avoid financial penalties and little chance of a return on the ordered investment. The possibility of trade disruption as Britain leaves the EU in late March is giving auto manufacturers sleepless nights.

The Center of Automotive Management (CAM) in Bergisch Gladbach, Germany said the glory days of fat profits are over, for the time being.

“Global carmakers have been experiencing the best years in automotive history since 2011. The profit of the 17 most important (manufacturers) rose in 2017 to a total of around 106 billion euros ($121 billion) from 65 billion euros ($74 billion) in 2011,” a CAM report said.

Fat years over
“However, the “fat years” in the automotive industry are over for now. Rather, technological, economic and political changes are now announcing difficult times for the industry, which should significantly reduce profits and returns over the coming years. In particular, new players from the digital and mobility world will in future increasingly compete with established automotive manufacturers with new business models,” CAM said.

Demand for autos is at a dangerous tipping point, according to Morgan Stanley, as buyers put off purchases waiting for the new technology in the form of electric cars to take the stage.

“As manufacturers promise a wave of all-electric vehicles with step-change improvements in connectivity, (remote) updatability, and safety, why take the risk of buying what could soon be an obsolete vehicle today? If consumers wait it out, what does this mean for 2019/2020 demand and profitability,” Morgan Stanley said in a report. 

We’ve been promised this revolution for some time now, but 2019 is unlikely to be year of the electric car as all the new entrants, like the Audi-E-tron, Jaguar I-Pace and Porsche Taycan, are seriously expensive. Even the so-called affordable Tesla, the Model 3, is still very pricey and way above the promised $30,000 tag so far.

A report from Arthur D Little (www.adl.com/FOAM) might give under- pressure carmakers some consolation. The idea that new generations of buyers don’t have any passion or interest in cars, has become the conventional wisdom at automotive conferences, but the Arthur D Little report challenges that.

People still want cars
“The desire to own vehicles – also from a status perspective – has not changed at all. This means (our) assumptions for market volumes projections remain stable. The vehicle market will continue to grow,” the report said.

The idea that people will happily do without the convenience, privacy and comfort in favor of car sharing, takes a hit too.

“Despite that many people are registered for car sharing, consumers still consider it only an additional mobility option, with strong regional differences,” the report said.

“The desire for car ownership remains strong, especially amongst the young, and drivers are considering a dramatic switch to electric and hybrid vehicles,” the report said. 


 

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