Watch out for the automobile downturn cycle

March 3, 2015 at 3:58 pm Leave a comment

Automobile market is on a roll for several years but signs of a downcycle is appearing.

1) when subprime auto loans in US crumbles like the subprime mortage market years ago, expect a downturn in US auto market. Wells Fargo recognises the danger and is putting a cap on the subprime auto loans it deals in.

2) China’s slowing car sales due to slowing economy and restrictions on car sales in big cities(because of pollution and congestion concerns). According to this wall street journal article, ” But in China auto makers typically cite wholesale deliveries to dealers and not sales to end consumers.

One way of gauging just how many consumers are buying cars is to look at car-registration data. While this data is more dated, it does provide another glimpse of demand—one often not as rosy as the auto makers’ figures.

Analysis of registration data by compiled by investment research firm JL Warren Capital released over the weekend suggests 2015 got off to a slow start. Around 46,000 BMWs were registered in China in January, a decline of 4% compared with the same month last year. Mercedes-Benz was up 2% to just over 32,000 cars, according to JL Warren. Audi registrations held up better–some 65,000 cars were registered by drivers in the first month of this year, up 13%.

JL Warren analyst Junheng Li is particularly cautious on BMW. “We continue to believe that BMW has given too high a sales target for its China market and a potential dealer revolt in its fastest growing market is probable due to the unresolved tension and conflict from last year,” she said.”


Entry filed under: Watch your step.

Is the bear market extinct? Pot calling the kettle black

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