7/31/2018 | 1 MINUTE READ

Automotive Industry Growth is Unpredictable

Facebook Share Icon LinkedIn Share Icon Twitter Share Icon Share by EMail icon Print Icon

The industry has exceeded the expectations of many experts from as recently as the end of 2017.

Share

Facebook Share Icon LinkedIn Share Icon Twitter Share Icon Share by EMail icon Print Icon

Of the many economic factors that have an impact on the automotive industry, strong employment levels and wage gains are likely two significant factors behind the auto industry’s performance in 2018. The industry has exceeded the expectations of many experts from as recently as the end of 2017. Working counter to these factors is an eroding financial picture in which banks are less willing to provide credit. Additionally, vehicle-loan default rates are closer to their peak during the great recession than their long-run levels prior to 2008. The recent net effect of these influences has been largely to offset one another, if not slightly to the benefit of the industry. In the first half of 2018, monthly light truck and SUV sales remained near the one-million unit market while car sales during the second quarter were flat, halting an otherwise downward trend.

While the exact reasons for any given firm’s future may be unique to that firm’s circumstances, the collective results of these forecasts may shed light on the general direction of the industry in the coming months and years. Reviewing Wall Street’s financial projections for 23 automotive firms with cumulative first quarter revenues of $223 billion reveals a somber outlook for the industry between the second quarter of 2018 and mid-2020. Overall earnings and revenues by the end of 2018 are projected to be modestly better than a year ago. However, the cumulative projections for 2019 indicate a flat to slight downward trend in revenues and contracting earnings. 

Although the Gardner Business Index data are not projected, examining only the automotive data seems to support Wall Street’s notions that the industry may need to prepare for a more challenging environment in 2019. In the five quarters ending with the first quarter of 2018, Gardner’s data indicated new orders and production as the fastest growing economic industry drivers. However, by the second quarter of 2018, readings for new orders and production had moved lower, giving way to higher readings for supplier deliveries and employment. Generally, these are considered lagging indicators, as both are slower to respond to economic growth. While this transition of drivers is no guarantee of an immediate economic slowdown, it is consistent with an industry coming off expansionary times.

For more information from Gardner Intelligence, visit the website

 

Hand holding a crystal ball

We’d rather send you $15 than rely on our crystal ball…

It’s Capital Spending Survey season and the manufacturing industry is counting on you to participate! Odds are that you received our 5-minute Metalworking survey from Modern Machine Shop in your mail or email. Fill it out and we’ll email you $15 to exchange for your choice of gift card or charitable donation. Are you in the U.S. and not sure you received the survey? Contact us to access it.

Help us inform the industry and everybody benefits.

RELATED CONTENT

  • Racing to Create Custom Pistons

    Laser scanning technology enables this automotive aftermarket company to design and machine custom sets of pistons in short order.

  • Workholding That Works for Jesel

    The maker of racing engine components produces parts that have many permutations within each product line. Here is how Jesel sets up work for cost-effective, responsive machining.

  • Korea Shows It Can

    Machine tool builders in Korea have been playing a catch-up game for the past decade. A review of current developments in machine tool technology indicates that Korea is rapidly pulling up with manufacturers in Japan, Europe and the United States. The products from Korea closely match their counterparts from other global suppliers in terms of capability and quality.

Related Topics

Resources