Categories Analysis, Consumer, Markets

2019 looks to be a challenging year for automobile manufacturers

It was a mixed bag for the automotive industry so far this year, with the record high sales witnessed in the early part of the year being eclipsed by uncertainties caused by tariff-related issues and high interest rates in the second half. Market watchers are of the view that the ongoing softness in shipments might continue next year.

A recent survey revealed that automobile dealers are more pessimistic than ever before about their business prospects for the coming months, mainly due to the fast-changing customer taste and falling demand for conventional passenger cars. Data shows passenger car sales declined in November, while shipments of pickup vans and SUVs increased.

One of the main challenges facing automakers is the tariff imposed by the Trump administration on vehicles and the steady shift from sedans and hatchbacks to SUVs and pickup trucks.  Currently, the leading automakers are busy revising their strategies to cope with the changing market conditions.

Data shows passenger car sales declined sharply in November this year, while shipments of pickup vans and SUVs increased

The restructuring program rolled out by General Motors (GM) recently, marked by extensive plant closures and layoffs, says a lot about the dismal scenario. The company is discontinuing five of its production facilities in North America and reducing the workforce by 15%.

Rival car maker Ford Motor (F) is also preparing for a comprehensive overhaul – on a larger scale compared to GM – with focus on factory shutdowns and layoffs. It is estimated that both the companies will be forced to shun some of their popular car models in the process, especially considering the growing demand for electric car brands like Tesla (TSLA). Ford recently announced plans to phase out its passenger car fleet after demand plunged both in the local market and overseas.

A look at sales trends and forecasts in the US automobile industry

Excess capacity is a problem faced by most local manufactures, which intensified in recent times due to the continuing influx of foreign automakers that set up facilities in the US.

Considering the rapid adoption of electric vehicles and rising oil prices, automakers will be inclined to focus more on their non-fossil fuel models. That will also help the companies tap into overseas markets like China where they face a decline in demand. Adopting new technology and ramping up investment in autonomous and battery-powered vehicles is the key to staying relevant.

After falling from its peak mid-year, GM stock has been struggling to recover the lost ground. Ford, which had a rather dismal performance so far this year, is continuing the losing streak after hitting a 10-year low in October.

 

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