Submitted by Taps Coogan on the 27th of May 2019 to The Sounding Line.
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Danielle DiMartino-Booth, CEO of Quill Intelligence, and Daniel Ruiz, founder of Blinders Off Research, recently held a round table discussion for Real Vision about the slowdown in the global auto industry.
Some excerpts from Danielle DiMartino-Booth and Daniel Ruiz:
“The global automobile sector has been in an expansion for two decades now… The growth has been largely attributable to the growth of registered drivers in China. They have doubled in the space of six years to 350 million drivers. There will be 400 million registered Chinese drivers by the end of this years which equates to the populations of the United States and Germany combined. Now the Chinese government has done a ton (to pull forward demand). Can you imagine cash for clunkers for two years? That’s literally what they’ve done. They’ve pulled such magnificent amounts of demand forward that they are now suffering the backlash of that… You look and you see the ties between the German manufacturing monster, they produce twice as many cars as the United States… on an economy that is deeply reliant on its 800,000 directly employed autoworkers and then everything that’s related to them, and they’re all producing internal combustion engine cars… The Chinese government has basically laid the law down and said: ‘You will buy electric vehicle cars… You will be penalized for buying internal combustion engines,’ and you see that Germany is effectively in recession… Their manufacturing survey came out at 44.7 in March. That’s not borderline… that’s deep in contractionary territory… If there is a slowdown in the United State’s domestic market on top of Germany going into recession, on top of China being incapable, despite pumping $800 billion of stimulus into their economy in this year’s first quarter…, you’re talking about a turn in a secular expansion that’s going to come to a screeching halt after 20 years.”
“… Why aren’t stocks reflecting the dire situation that’s just been illustrated? It think part of the reason is when you look at the financials of some of these companies, particularly the ones in the US, they sell cars worldwide (but) the bulk of their earnings are here in the US… 109% of Ford’s total company EBIT (Earnings Before Interest and Tax) came from North America last year. 86% of General Motor’s total company EBIT… comes from North America. FCA (Fiat Chrysler), 86% of total EBIT: North America.”
“Total vehicles (inventory supply in the US) are now at the same day level as they were back in December 2008, so in the heart of the recession. Truck day-supply is now at the same level as June 2008. This is incredibly important because our nation has completely shifted demand towards trucks… The Ford F-150, which represents 37% of Ford’s total production in North America, their day supply is at 84… Silverado has a day supply now of 128 days. Sierra has a day supply of 109 days. Those two trucks alone represent 24% of General Motors production in 2018… These vehicles are critically important and more so than any of the other models they carry in their lineup… the (FCA) Ram pickup truck has 134 days of supply and their Wrangler has 112 days of supply. Those two vehicles combined are 33% of (FCA’s) total production volume in 2018… (We’re going to see) not only production cuts, but production cuts where they hurt… There are no original thinkers at the helm… We’ve been here before. In 2005, the sales mix of trucks peaked at 59% and at the end of the recession, it bottomed at 40%…”
There is much more to the discussion, so enjoy it above.
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