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Industry News: The Run of Near-Record Sales Appears to be Ending


William Maley

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2018 saw a continuation of near-record sales and large profits for automakers in the U.S., but that appears to be coming to an end. Bloomberg reports various factors are conspiring to end this trend such as increasing interest rates and the average price of a new vehicle hitting record highs. While some may point out that 2018 saw a 0.3 percent increase in vehicle deliveries (17.6 million according to AutoData), analysts point that this is due to the tax cuts brought by President Donald Trump last year and automakers selling more vehicles to fleets.

Charlie Chesbrough, senior economist at Cox Automotive said that the big U.S. automakers saw deliveries fall at a faster rate "in the last three months of the year than for all of 2018."

"For some automakers, the slowdown has already begun,” said Chesbrough.

Look at General Motors as an example. For the fourth quarter, GM reported a 2.7 percent drop in sales - 785,229 vs. 806,739 for 2017.

“We’ve had a gradually declining trend on retail even with the tax changes. That’s the kind of trajectory we would anticipate given continued headwinds on the economic side,” said Emily Kolinski Morris, Ford’s chief economist.

What are we expecting in terms of sales for the coming year? It seems everyone agrees that it will be at or under 17 million vehicles, but estimates vary widely with one predicting 16.5 million due to reductions in fleet purchases. Executives are quick to caution that sales won't implode this year. Scott Keogh, president and chief executive officer of Volkswagen of America said on a conference call that unemployment is low and consumer confidence is high. But the issue uncertainty with Keogh saying consumers are watching "interest rates rise and are wary of what’s been a volatile stock market of late."

“When the headlines say that the market has had the worst falloff since 2008, that will rattle consumer confidence,” he said.

Source: Bloomberg (Subscription Required)


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If interest rates & car prices are an actual factor (I question it strongly), EVs are in for 'double trouble'- a Tesla is going to be $3500 'more expensive' by the end of this year, and they're already a multiple of the average new car price as it is. Bolt is in the same boat (tho it's MSRP is far more palatable).

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2 minutes ago, balthazar said:

67% of GDP is consumer-sourced. Although obviously some balance of spending & saving is the most desirable- consumer spending keeps Big Gov't breathing.

Yet Big Gov needs a serious diet especially in defense spending and certain social services.

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9 minutes ago, dfelt said:

Yet Big Gov needs a serious diet especially in defense spending and certain social services.

Depends on which social services but yes to defense. And cut out every last time of foreign aid.

And as for the sales thing...Ford just cancelled the ST twins...the only thing outside of a Shelby Mustang I could conceivably want from them. GM hasn't built sport compacts in a long time...years.

Outside of my usual suspects nothing new to get my interest of money.

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13 minutes ago, A Horse With No Name said:

Depends on which social services but yes to defense. And cut out every last time of foreign aid.

And as for the sales thing...Ford just cancelled the ST twins...the only thing outside of a Shelby Mustang I could conceivably want from them. GM hasn't built sport compacts in a long time...years.

Outside of my usual suspects nothing new to get my interest of money.

Yup, I think we waste way to many borrowed dollars on social programs outside this country that gain us nothing at a time that we need to focus on ourselves in rebuilding strong the infrastructure of this country.

Totally agree also with the defense spending to other countries that needs to be re-evaluated as we need to force our gov to live in the budget and pay down debt.

Why the political points is that I feel no matter how one feels about the Detroit companies, they are now thinking long term in cutting products that they do not compete profitably in and focusing on areas that they do believe they can do even better.

We all have to live within a budget, the gov should too and while some here hate GM for the plant closures and lay offs, the good of the whole I believe is being looked at in the long term over the good of the few.

Only time will tell how GM, Ford, FCA, etc. plays out and who survives into the 21st century EV future.

I can actually see Tesla surviving over some other brands especially from FCA.

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1 hour ago, daves87rs said:

Time to pay the piper.....everything will fall, from cars to phones....

 

Correction is kinda an understatement.......

And once again...I feel no love towards Ford and have no well wishes for them in all of this.

1 hour ago, dfelt said:

Yup, I think we waste way to many borrowed dollars on social programs outside this country that gain us nothing at a time that we need to focus on ourselves in rebuilding strong the infrastructure of this country.

Totally agree also with the defense spending to other countries that needs to be re-evaluated as we need to force our gov to live in the budget and pay down debt.

Why the political points is that I feel no matter how one feels about the Detroit companies, they are now thinking long term in cutting products that they do not compete profitably in and focusing on areas that they do believe they can do even better.

We all have to live within a budget, the gov should too and while some here hate GM for the plant closures and lay offs, the good of the whole I believe is being looked at in the long term over the good of the few.

Only time will tell how GM, Ford, FCA, etc. plays out and who survives into the 21st century EV future.

I can actually see Tesla surviving over some other brands especially from FCA.

In regards to Tesla absolutely hope they survive and thrive. FCA is holding their own. Pacifica is decent...muscle cars are interesting...Jeep is doing well. Fiat will die a second and final North American death.

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23 hours ago, balthazar said:

If interest rates & car prices are an actual factor (I question it strongly), EVs are in for 'double trouble'- a Tesla is going to be $3500 'more expensive' by the end of this year, and they're already a multiple of the average new car price as it is. Bolt is in the same boat (tho it's MSRP is far more palatable).

True but they also cut prices to compensate some of that.

https://www.caranddriver.com/news/a25725993/tesla-price-cut-model-3/

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16 hours ago, ccap41 said:

True but they also cut prices to compensate some of that.

https://www.caranddriver.com/news/a25725993/tesla-price-cut-model-3/

I understand; drop of $2000, but by the end of 2019 the tax credit will have halved twice, making a given Tesla $3625 'more expensive' than on 12.31.18 (in people's minds).
 

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37 minutes ago, riviera74 said:

If anyone thought that the high sales would last, they are wrong.  Given high median and average transaction prices on new cars, sales this year could be more like 15 million rather than 17 million.

And I honestly hope their are enough high margin sales to keep at least part of the economy going.

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25 minutes ago, balthazar said:

Dow Jones rose 2300 pts since December 26th. That's a pretty definite pull back from a near bear market, but 1 month's stock market performance does not make a recession anyway.

Totally agree, from the housing market to Retail and the stock market, many signs things are about to cool off even is the stock market holds or goes up. After all, there are plenty of people putting cash into 401K's and as such, the money has to go some place. Yet with that said, many signs we are headed for a pause, recession, cooling off of the global economy, etc..

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