MarketsOct 2, 2024
Auto Makers Signal Slowing Demand As Promotions and Credits Do Little To Offset High Borrowing Costs, Vehicle Affordability
Industrial Friction
Noah Weidner
Discover
What’s driving the market? It’s certainly not the auto industry right now. Higher interest rates have flattened the industry’s tires — and instead of hot wheels, dealers are getting cold shoulders from buyers. That’s bad news for automakers (and potentially a negative indicator for the economy).
Heading downhill… and not in a good way. According to the WSJ, vehicle sales remain below pre-pandemic levels — even with discounts, rebates, and preferred financing offers. In the third quarter, US vehicle sales dropped 1.9% year-over-year (YoY), showing that many consumers are swearing off big purchases to focus on other spending priorities.
All of this adds up to trouble for global automakers. Facing a difficult macroeconomic environment, a more restrained consumer, and new competition from cheaper, subsidized Chinese entrants, many are fore-warning investors about weaker performance.
Floating a number: At the current sales pace, global vehicle producers are projected to sell 15.7M vehicles in the US this year — slightly higher than last year but far below the 17M sold annually from 2015 to 2019. However, that target could still be missed if vehicle shipments are delayed by the ongoing East Coast strike, which may stretch on for days or weeks. With automakers already struggling, any further delays could add unexpected costs or complications that even future Fed rate cuts may not solve quickly.
