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U.S./China Auto Tariff War Will Lose Sales Worth $770 Billion

U.S./China Auto Tariff War Will Lose Sales Worth $770 Billion.

“The U.S. with its tariff wars is seriously damaging the Chinese auto industry, and as the market is China’s key market for the German auto industry, the German car industry will be seriously damaged too”

Auto sales are coming under huge pressure from the tariff war between China and the U.S., and some other big negatives, and the global industry will lose sales over the next 5 years worth nearly $770 billion, according to Germany’s Center for Automotive Research (CAR).

The biggest loser will be China, and then German auto manufacturers. German auto makers should reach out to China in order to secure long-term prosperity.

Investors also worry about a global economic slowdown and the massive cost of moving the industry to new technology and away from fossil fuel power, according to a report from CAR.

CAR, part of the University of Duisberg-Essen, said global car and SUV sales will fall from a high of 84.4 million in 2017, down to 77.3 million in 2020 before slowly recovering to 87.9 million in 2025.

“In the worldwide car (and SUV) market in the years 2018 to 2024 cumulative sales slumps of more than 35 million vehicles worth 700 billion euros ($769 billion) will have to be absorbed. A good 80% of the losses accrue to China,” CAR director Professor Ferdinand Dudenhoeffer said.

“The U.S. with its tariff wars is seriously damaging the Chinese auto industry, and as the market is China’s key market for the German auto industry, the German car industry will be seriously damaged by U.S. tariff policy,” Dudenhoeffer said.

Another report, from S&P Global Ratings, said the world’s light vehicle sales look set to fall by between 2 and 3% this year with virtually no growth between 2020 and 2021.

“Worsening global economic conditions, the trade war between the U.S. and China, and the high cost of innovation for carmakers will continue to dampen sales,” said S&P Global Ratings credit analyst Vittoria Ferraris.

Profits will be hard to make too, but low interest rates will help manufacturers and buyers.

Margin erosion
“We expect auto manufacturers will suffer some margin erosion, particularly in the mass-market segment, as they may struggle to fully pass through the increased cost of connectivity, electrification, and autonomous driving. These rising costs will translate in higher auto prices and damage consumer affordability, additionally deterring car buyers,” Ferraris said in the report.

“On the plus side, persistently low interest rates should support affordability, while a rich pipeline of new models featuring sophisticated upgraded connectivity and electrification options and autonomous solutions will be attractive for the market,” Ferraris said.

S&P Global Ratings expects light vehicle sales in China to fall 7%-9% this year. U.S. sales will slip 3% and decline up to 2% in Europe.

CAR’s Dudenhoeffer said President Trump’s tariff wars are destroying national wealth in Europe, particularly Germany’s. The huge loss of sales means there will be a significant withdrawal of capital from the industry, which will make it more difficult to meet the high costs of electrification. Dudenhoeffer said German manufacturers should reach out to China and build up contacts which will secure the industry’s prosperity.


 

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