Global Prospects For Auto Industry Turn Sour.
“As the European industry accelerates its efforts to bring new models to the market between 2019 and 2020 consumers might decide to defer purchases”
In normal times, investors in the big auto manufacturers can reckon that if sales in the U.S. start to slide, then markets like Europe and China will step in and provide the growth.
According to a report from S&P Global Ratings, investors must think again.
S&P Global Ratings said it had reckoned Europe would provide a little growth in 2019, but now it sees stagnant sales this year. Sales in the U.S. will fall 3.6% in 2019 and will stabilize at between 16.3 to 16.5 million from its previous forecast of 16.8 million, while China, which has provided a hugely expanding market for about 20 years is now likely to fall by 3%. S&P previously expected growth of between 1 and 2% in China.
Tariff shenanigans between China and the U.S., must make life for forecasters harder than usual, but S&P said a sales tax to 13% from 16% by the Chinese government is not enough to make much difference to demand.
News President Trump has probably put off by 6 months a decision to impose imports on cars and parts will provide some temporary relief for Europe’s major auto makers. The decision had been expected May 18.
European sales will be hard pressed to grow as worries linger about what a Brexit outcome will look like, while European Union rules on carbon dioxide (CO2) emissions which kick in next year could provide some nasty surprises for investors in the form of monster fines for non-compliance.
“As the European industry accelerates its efforts to bring new models to the market between 2019 and 2020 to comply with stricter environmental regulations, we deem it likely that consumers might decide to defer purchases next year, when the product offerings will be larger and presumably more affordable,” the report said.
U.S. sales will decline as borrowing costs approach a 10-year high, tax benefits for electric cars wane, and global political worries dampen consumer demand.
The latest data from LMC Automotive shows U.S. sales in April down 2.2% to 1.33 million, which it said was an annual rate of 16.4 million, down 980,000 from the previous month. China sales decelerated again in April to an annual rate of 23.6 million, down more than 11% from March. The April selling rate in Western Europe rose to 16.3 million from 16.0 million the previous month, although that still meant sales for the year so far were down 2%. LMC Automotive lowered its Western Europe forecast for 2019 sales to growth of 0.2% from its previous expectation of 0.3% growth.