The outlook for the global automobile market has been increasingly dire lately, especially after a third quarter that saw sales drop in many major markets across the globe, including China. Now, the latest data from Europe suggests that the difficulties may be nowhere close to over despite optimistic fourth quarter guidance by companies like Volkswagen and Daimler AG.
Deliveries of new passenger cars were down 7.4% in the EU and the European Free Trade Association in October from the year prior. This adds to a 23% drop that occurred during September according to data from the European Automobile Manufacturers Association, and which was so acute it led to the first negative GDP print for Germany since 2015.
Despite the ongoing sales weakness, which many attribute to one-time events, some analysts – like those at EY Consultancy – still expect the market to turn around in the fourth quarter. They argue that new emissions testing cited by many companies as the reason for disappointing sales, will only have a temporary effect.
At the same time, Citigroup analyst Angus Tweedie thinks the downside is not over for companies like BMW and Daimler AG, according to Bloomberg. In a note titled “The Golden Age Ends With a Crash”, Tweedie wrote that “Heading into 2019 we see few remaining avenues of maneuver, and with volume growth slowing in most markets believe the scale of pressures will become obvious.”
Meanwhile, ongoing challenges like the slowdown in China have been exacerbated by trade wars, casting a cloud over the industry. However, one of the main potential threats, tariffs on imports from the EU, has been alleviated for now, as we wrote yesterday. Following the data release, European automakers like Daimler, VM, and BMW were all trading lower between 1% and 2%.
The new emissions standards (dubbed “WLTP”), a remnant of German automakers’ emissions test cheating days, continue to be a cause for profit warnings for companies like Daimler and BMW. The rush to get cars ready for new regulations has put pressure on auto sales this quarter. And while BMW made the deadline, it reportedly couldn’t escape pricing pressure from competitors entering the market at the same time.
The September and October slump follows a marked jump in August that occurred as auto makers rushed to sell vehicles before the new regulations took place. Total sales in Europe are holding onto a meager 1.4% gain through October even as China now predicts its full year passenger auto sales will post their first annual decline in 30 years.
via RSS https://ift.tt/2FkZHxE Tyler Durden