According to the news report by MarketWatch, the good news from the US with regard to auto sales is tempered by bad news from the industry’s global markets, where sales are slowing down.
In 2018, sales of vehicles cross 17 million for the fourth consecutive year. The best sellers were the more expensive pickup trucks and SUVs, which do well when gasoline prices are low.
In fact, industry giant General Motors released its 2019 sales forecast with numbers that were much higher than market analysts had estimated. One of the reasons why the country’s number one auto maker in terms of sales was able to do so was because of the launch of its redesigned pickup truck which has done really well in the US market.
However, that is where the good news ends. The world’s biggest auto market, China, shrank for the first time in the last few decades. Major players such as Ford Motor Co. and Fiat Chrysler Automobiles NV faced losses in this market in the last few quarters of 2018. GM, which is one of the top auto companies in China saw a massive 25% drop in its sales in the last quarter of the year.
The situation is similar in European markets. Last week, Ford announced cost cutting plans that could mean laying off thousands of workers as well as the removal of several models from region.
Again, like China, Europe also saw a decline in auto sales across the board after decades of growth. This slide was due to global trade worries as well as Brexit.
In Latin America, the auto market is showing signs of slow recovery, through sales still remain sluggish.
The Chief Executive Officer of GM Mary Barra, during a conference call with analysts last week, stated that the auto maker may not be able to afford operating in the region much longer if this situation continued. She stated that Latin American economic struggles had stopped GM from becoming profitable despite the massive restructuring the company had undergone.
The major question is whether the US market will be able to offset the shrinking international markets this year. The outlook seems grim. Many analysts forecast that in 2019, sales of vehicles in the US will be less than 17 million. If this happens, it would mark the second year-over-year drop in sales since the markets crashed in 2007.
Dealers and analysts are pessimistic in their outlook due rising interest rates. According to Bankrate.com, 60-month bank car loans are expected to close 2019 at 5.5% vis-à-vis the less than 5% interest rates customers enjoyed in 2018.
Added to this, the prices of second-hand vehicles have also gone down, which means buyers could move away from the new-car market.
Another factor that could impact auto sales in 2019 is the growing electric car and self-driving vehicle market. Auto makers as well as parts manufacturers are expected to divert more funds to the development of these types of vehicles this year, which means that there will be more cost pressure for them.
According to RBC Capital’s Joe Spak, 2019 will most probably see more challenging volumes, which in turn will put pressure on the operating environment for car makers across the board.
Volkswagen AG’s Chief Executive Officer for the US Scott Keogh feels that the current environment for the industry as a whole is going to be difficult to navigate. While there are indications of a strong economic environment, there is also uncertainty about trade, the ongoing partial government shutdown and extreme market volatility.
A Houston, Texas Ford dealer – Mitchell Dale – stated that there was a lot of negativity among consumers at the moment which could impact their willingness to purchase a new car.