Run Out Of Road

Auto sales

Image source:

What's going on?

General Motors (GM), Toyota, and Fiat Chrysler reported falling US sales last quarter and according to a report on Wednesday from Swiss investment bank UBS, things may soon get worse in Europe, too.

What does this mean?

At this late stage of an economic growth cycle, consumers typically spend less on big-ticket items and focus on the essentials. Analysts predicted a continued decline in US auto sales: higher interest rates compared to a year ago and no additional tax breaks encourage more people to buy used rather than new vehicles. Still, those who did buy new vehicles last quarter paid around 3% more on average than they did last year, as SUVs and trucks push cars out of American garages (see todays #chartoftheweek).

Its not just the US suffering, however. UBS predicts that complying with new European regulations on vehicle emissions which have already contributed to Germanys skidding economy will cost the regions automakers a combined $8 billion of profit in the next two years (tweet this).

Why should I care?

The bigger picture: Automakers are making bold moves.

Toyota followed in Teslas tire tracks on Wednesday: it’s allowing rivals free access to its hybrid electric vehicle patents until 2031. This may help maintain Toyota as a force in the electric race even if others take pole position and come 2031, licensing fees could boost the companys profits. Frances Peugeot, meanwhile which bought GMs European business two years ago is returning to North America for the first time since 1991, likely in a bid to mitigate the impact of more punitive European pollution laws.

For markets: Trading lanes may clear.

Stocks rose globally on Wednesday, largely thanks to reports that trade talks between the US and China were nearing an amicable conclusion. Thatd be a boon for US auto companies, as itd lower tariffs on their vehicles entering China. It’d be good for the Europeans, too: they actually produce most of the vehicles shipped to China from America.

Originally posted as part of the Finimize daily email.

The top 2 financial news stories in 3 minutes. Join over one million Finimizers

Read next

Homes Under The Hammer

Sign up to Finimize

Get the two most important global financial news stories each day. Sent at midnight UK time.

Get started with one email a day

The top financial news stories in 3 minutes.