·The automobile industry has to undergo the first simultaneous negative growth in the three major markets in winter since 2009
The global auto industry may have to prepare for the difficult days. The three major auto markets have seen sales decline for the first time since January 2009.
In April of this year, Western European car sales fell by 6.8%, the largest decline since 2013; US new car sales in April fell by 4.7% year-on-year; in China, the national passenger data showed that passenger car sales in April fell by 1.7%.
This is also the first time that the three major markets have experienced a decline in car sales since January 2009, and their cumulative share in the global auto market is as high as 70%.
The bleakness of the global auto market is even more apparent in car companies. Ford's earnings report showed that adjusted pre-tax profit fell 42% to $2.2 billion in the first quarter of this year; net profit fell 35% in the first quarter. The US media also reported recently that it plans to lay off about 10% of its global workforce in response to the company's continued decline in share price and sluggish earnings.
The auto market may be ready for difficult days. Morgan Stanley believes that used car prices may fall by more than 50% in the next 4-5 years, which is obviously not good news for new car prices.
Morgan Stanley said that this is first of all because the long-term rental market continues to grow, and the rise in the supply of such vehicles has also squeezed demand for used cars. According to the report, this has doubled since 2012 and is expected to increase by another 25% in the next two years.
In addition, Morgan Stanley said there are a number of reasons for the use of used cars, which may affect the price of new cars. The report states:
Interest rate upside: car loan interest rates have begun to emerge from historical lows.
The penetration rate of deep subprime reached a record high: 32% of the car ABS in 2016 was a deep subprime loan (FICO weighted average credit score below 550), which was only 5% in 2010.
New car inventory hit a record high: 2016 inventory levels are 10% higher than in 2015, and this trend is expected to continue in 2017.
Vendor price competition: At this point in the current cycle, we are beginning to see more capital invested in this industry. As the price of new cars declines, the price of used cars becomes relatively high, so the price of used cars needs to be lowered to regain the balance between supply and demand.
ADAS penetration rate increases: We expect car companies to achieve 100% active safety penetration by 2020, resulting in an unprecedented safety gap between new and used cars, accelerating the outdated safety of used cars. And insurance companies' premium premiums on older vehicles may also accelerate this shift.
The trouble of the short-term rental market: affected by a large number of factors, including the choice of consumer transportation methods (such as shared travel), car rental companies are facing problems such as stagnant growth, weak pricing and excess vehicles. As these vehicles enter the market, the impact on prices will also be significant.
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