‘The pain is just beginning’: After 38,000 layoffs, Wall Street wakes up to ‘peak car’

For the auto business, “the pain is just beginning,” according to the Nomura analyst Masataka Kunugimoto and his team. “We now expect global auto demand to be down 3%,” year on year, in 2019, he told clients recently. He is not alone. At bank after bank, analysts are coming round to the idea that the…

‘The pain is just beginning’: After 38,000 layoffs, Wall Street wakes up to ‘peak car’

For the auto business, “the pain is just beginning,” according to the Nomura analyst Masataka Kunugimoto and his team. “We now expect global auto demand to be down 3%,” year on year, in 2019, he told clients recently. He is not alone. At bank after bank, analysts are coming round to the idea that the world may have passed “peak car” and that in the future people will need fewer personal vehicles. Certainly, they are telling clients, diesel vehicles will collapse into a niche as their polluting exhausts are regulated out of existence. Petrol/gasoline vehicles will be next, as governments in Europe and the United States set dates for manufacturers to switch their models to electric. But that’s not all. As on-demand services like Uber and Lyft grow their customer bases, more people will decide they no longer need to own a car of their own. Why would you, when it’s cheaper to ride around in someone else’s? Just look at how analysts are talking about cars these days: “The industry is right now staring down the barrel of what we think is going to be a significant downturn,” Bank of America’s John Murphy told a conference last week. The decline of sales in China “is a real surprise,” he added. “We expect passenger vehicle sales in Europe (ex-Russia) to fall 4%” year-on-year, to 15.06 million units in 2019, Nomura’s Kunugimoto said. In the US, he believes, sales will go down 3%, to 16.8 million cars. “In our view, the peak in auto sales is clear,” Bank of America’s Michelle Meyer and Anna Zhou told clients recently. “A core view of John Murphy, our auto equity analyst, is that the auto cycle has peaked. And he expects further slowdown,” with US sales slumping to 16.3 million — lower than Nomura’s estimate. “He sees new auto sales heading lower largely due to the ‘tsunami’ of used vehicles supply which depresses the prices of used vehicles (making them more attractive than new).” Their colleague Ethan S. Harris agrees: “There is a negative narrative developing in the auto sector as inventories climb amid softening demand. Inventory for light trucks and SUVs has been climbing to uncomfortably high levels.” The most dramatic
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