Displaying items by tag: cars

(Detroit)

The car industry has not been doing so well over the last few years. After seeing a big surge in sold vehicles leading up to 2015, sales have fallen off and the industry has been in a slump. If demographics are any sign, things aren’t going to get much better any time soon. New data shows that the average car buyer is getting older, and worse, cars are staying on the road longer, hurting companies’ all important replacement cycle. In terms of the total number of cars sold in October, the US is back in the same territory as it was in 2002.

FINSUM: There is no point denying it—a lot of car prices have risen dramatically over the last two decades (versus salaries), so it is no wonder average buyers are getting older and cars are being held longer. More than half of buyers are now over age 55!

(New York)

Quickly, name a sector that Wall Street hates right now. Auto stocks should come to mind. The car industry is in a sales downturn and is in the midst of broader upheaval brought on by electric cars, new competitors, and changing ownership patterns. The Nasdaq Auto Index is down almost 20% in the last year. However, all the changes have created an opportunity to buy into the sector, but not in car companies themselves. Instead it is high tech car suppliers that look attractive as they have a unique niche to fill in the changing industry. Check out Aptiv, Visteon, and BorgWarner.

FINSUM: This seems like a smart way to play all the shifts happening in the automobile industry.

(Detroit)

By all accounts, the US car industry should be doing well. Vehicles sales have been good, unemployment is low, and gas is cheap. However, US car companies are closing factories and laying off workers and acting like we are in a big recession. Why? The answer is that their product mix and manufacturing capabilities are seriously out of touch with the market. In particular, they have far too much sedan manufacturing infrastructure in a market that no longer has much use for sedans. This is a huge problem because overcapacity is what doomed car companies in the last recession.

FINSUM: The good thing here is that the car companies are trying to be proactive in adjusting their facilities ahead of a broader downturn. However, closing factories and laying off workers following such a good run is getting a lot of negative political attention.

(Detroit)

Many might not think of it this way, but automotive stocks are good leading indicators of the economy. Between the top car companies and auto parts suppliers, the car business creates a little shy of $3 tn in sales per year. But the market is not well at the moment. Big car company shares are down 13% this year, while suppliers have fallen 24% (not one of the top 25 has risen). Interestingly, though, vehicle sales have not fallen yet and are still strong, as they often are when unemployment is falling and consumer confidence is high. The trouble may be in China, where sales are weakening, but the key point is that there is a lot of pessimism on auto shares.

FINSUM: It is important to remember that aside from the economic factors, car companies are under a disruptive threat from technology (e.g. self-driving cars and Silicon Valley), which may be contributing to the poor performance.

(Los Angeles)

One of the most disruptive technologies in industry might not seem that disruptive—batteries. Yet advances in batteries are about to reshape many areas, not least of which is the power grid. Home energy storage and car battery power are two of the biggest areas of disruption, and investors need to understand the dynamics in play. Better batteries mean less energy costs as power can be stored to smooth out demand-based pricing. It also makes electric vehicles legitimate, and possibly cheaper competitors to gas vehicles. Additionally, improved energy storage makes renewables profitable.

FINSUM: Batteries are going to change the economics of almost everything related to power. Make sure you understand some of the key battles because share prices are going to start reflecting the changes.