Latest / Bloomberg Intelligence / Auto Analyst Alan Baum: Auto Sales To Plateau This Year (Audio)

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Auto Analyst Alan Baum: Auto Sales To Plateau This Year (Audio) · Bloomberg Intelligence

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  Speaker 1: Broadcasting live to New York, Bloomberg eleven to Washington, d C,
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  Speaker 1: conversation with President of the San Francisco Fed, John Williams
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  Speaker 1: and two of his top researchers. And now we're gonna
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  Speaker 1: be diving into a topic that they are certainly watching closely,
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  Speaker 1: and that is otto sales PIM Fox. Of course back
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  Speaker 1: in New York. Yes, the US may be the lone
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  Speaker 1: bright spot in another wise sluggish global economy. American consumers
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  Speaker 1: continuing to buy expensive new vehicles at record levels. We're
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  Speaker 1: going to find out what this means for investing in
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  Speaker 1: automobile companies. But right now, let's go to Catherine Cowdery
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  Speaker 1: slowing down. European officials trim their economic growth forecast for
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  Speaker 1: remain mixed, with A I G declining after posting a
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  Speaker 1: about seventy nine billion dollars in Apple's market cap. Walter
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  Speaker 1: next iteration of the phone in the September to actually
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  Speaker 1: return to growth. The thing it's holding the stock where
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  Speaker 1: it is today is this hope that you're still going
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  Speaker 1: to get growth in the December Corps. Apple shares are
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  Speaker 1: up one point nine percent, trading at ninety one. We
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  Speaker 1: checked the markets every fifteen minutes throughout the trading day.
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  Speaker 1: Down Industrial l average is down one forty seven points
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  Speaker 1: eight seven eights of a percent, trading at seventeen thousand,
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  Speaker 1: seven hundred forty two. SMP five fundered down nineteen points
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  Speaker 1: and nine tens of a percent, trading at two thousand,
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  Speaker 1: sixteen one. The NAZZAC is down fifty one points, the
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  Speaker 1: loss of one point one percent, trading at forty seven
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  Speaker 1: sixty six. West Texas Intermediate for oil down a dollar
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  Speaker 1: seven of barrel two point four percent to forty three
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  Speaker 1: seventy one ten year Treasury seconds with the yield of
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  Speaker 1: one point seventy five. And now let's get an update
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  Speaker 1: of some of the other stories we're following today. Thank you,
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  Speaker 1: Catherine from the Bloomberg news room. I'm Rami in aescent cio.
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  Speaker 1: Thank you, And here's a quick check of the equity benchmarks. Down.
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  Speaker 1: Industrial averages down one hundred sixty four points at seventeen thousand,
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  Speaker 1: seven hundred twenty six SMP five, Founder down twenty one
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  Speaker 1: points to two thousand sixty mast Act down fifty five
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  Speaker 1: Business flash. You're listening to Taking Stock with Kathleen Hayes
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  Speaker 1: and Pimpox on Bloomberg Radio. The automobile industry taking a
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  Speaker 1: look at Americans love affair with the automobile. All Alan
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  Speaker 1: boun is the principal at Boum and Associates, based in
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  Speaker 1: West Bloomfield, Michigan, and he joins us now, Alan, thank
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  Speaker 1: you very much for being with us. Good afternoon. All right,
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  Speaker 1: so just give us the lowdown on today's sales reports
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  Speaker 1: for April and what does that tell you about a trend,
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  Speaker 1: if anything, for the rest of the year. Well, it's
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  Speaker 1: to be honest, it's kind of boring. It's kind of
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  Speaker 1: been what we've seen in the last few months. Crossover
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  Speaker 1: is good. Uh, new pickups doing well. Uh. Cars struggling
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  Speaker 1: depending on incentives, sometimes doing better than others. That's just
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  Speaker 1: the trend we're seeing. So Alan, Uh, when you is
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  Speaker 1: there a chance that we have to take the last
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  Speaker 1: two months together to get a sense of what the
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  Speaker 1: trend is now? Last year was such a hot year,
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  Speaker 1: and yeah, it looks at me like car companies are
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  Speaker 1: still doing really well, a lot of them. But in
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  Speaker 1: terms of pushing the economy forward, people say that, you know,
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  Speaker 1: they have to be net growing. What what's going to
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  Speaker 1: happen next month? What kind of trajectory on? Well, the
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  Speaker 1: biggest issue this year is going to be incentives, and
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  Speaker 1: that is will the automakers hold the line and not
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  Speaker 1: try to gain market share as the market plateaus. If
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  Speaker 1: the answer is no, ironically, that means that we're gonna
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  Speaker 1: see stronger sales with a bit of a payback coming forward.
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  Speaker 1: If the answer is yes, that they hold the line,
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  Speaker 1: then we'll have very modest increases from last year, which
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  Speaker 1: was an excellent year. Will plateau this year, and then
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  Speaker 1: we'll start to decline fairly modestly UH next year UM
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  Speaker 1: and and so the question then is how high do
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  Speaker 1: we go this year before we start to as I say,
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  Speaker 1: plateau and modestly decline. And in terms of volume, the
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  Speaker 1: impact is going to be somewhat modest. In terms of earnings,
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  Speaker 1: the impact can be rather significant UM and So, for example,
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  Speaker 1: GM has been losing market air this year because they've
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  Speaker 1: been holding the line on fleets. UH. Their their incentives
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  Speaker 1: are are creeping up, as is most of the industry UM,
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  Speaker 1: but they're there. Their results are excellent forward, of course,
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  Speaker 1: because of the full year of the F one fifty
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  Speaker 1: being available this year, UH is doing extraordinarily well. Their
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  Speaker 1: volumes are going up, they had an excellent first quarter
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  Speaker 1: and UH and and they're in increasing their fleet sales
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  Speaker 1: a little bit to make up for some lost time
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  Speaker 1: that they say they will they will scale back later
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  Speaker 1: in the year. Chrysler, on the other hand, f C
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  Speaker 1: A UM is somewhat treading water. Their volume is decent,
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  Speaker 1: their incentives they're high. They're clearly not making the kind
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  Speaker 1: of money they need to make at this point part
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  Speaker 1: of the business cycle. And obviously UH Sergio Marcion's discussions
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  Speaker 1: about needing a partner are related to this. Alan, can
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  Speaker 1: you comment on the RAV for the small SUV from Toyota,
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  Speaker 1: because I note that it broke a monthly record with
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  Speaker 1: sales up Yes, and and the and that whole segment
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  Speaker 1: is on absolute fire UH in a good way. And
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  Speaker 1: it's a question of incentives. For example, the Ford Escape
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  Speaker 1: UH is not growing at that rate simply because they
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  Speaker 1: can't make more of them. In the case of the
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  Speaker 1: RAP four, they've got a little bit more availability. In
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  Speaker 1: the case of the CRV, they're building them in three plants,
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  Speaker 1: so they have strong availability. In the case of the
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  Speaker 1: Rogue UH, it's doing really well, primarily on the strength
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  Speaker 1: of imports, again because they don't have enough capacity that segment.
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  Speaker 1: If you throw enough product at it, you're gonna sell
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  Speaker 1: and UH with with very modest incentives because of the demand.
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  Speaker 1: If I'm Volkswagen, Alan, should I be happy that my
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  Speaker 1: not state sales drop is the smallest inse December? Well,
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  Speaker 1: you know what they've done is they've they've increased their
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  Speaker 1: production over the last few months of gas models. Um,
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  Speaker 1: I suppose you should be because of all the diesels
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  Speaker 1: they can't sell. I suppose you should be happy about
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  Speaker 1: the volume. You're certainly not happy about the profits. The
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  Speaker 1: the incentives on those vehicles are dramatic. Uh, and they're
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  Speaker 1: gonna get bigger. You've got a dealer body that is
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  Speaker 1: an open revolt. Uh. And this isn't going to change
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  Speaker 1: because of the requirement of the court to keep this
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  Speaker 1: under wraps until they get every I dotted and and
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  Speaker 1: T crossed, and that's gonna take some time. Can automobile
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  Speaker 1: factories easily switch from making cars to making SUVs? Now
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  Speaker 1: they can make cars to crossovers, they can't necessarily switch
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  Speaker 1: from making cars to sport utility vehicles. And I the
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  Speaker 1: distinction between the front wheel drive product and the rear
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  Speaker 1: wheel drive product, and most of the demand is in
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  Speaker 1: the crossovers now. Again, just because they're on the same
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  Speaker 1: platform doesn't mean you can make that change easily. But
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  Speaker 1: you are seeing automakers make those kinds of changes in
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  Speaker 1: the production design process so that they do have flexibility
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  Speaker 1: going forward. And uh. You know, for example, at Ford,
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  Speaker 1: you've got the fusion in the edge. You're on the
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  Speaker 1: same platform, they're built in different plants, so there's a
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  Speaker 1: little that the flexibility is not immediate by any means,
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  Speaker 1: but from an engineering standpoint, you can plan for that
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  Speaker 1: going forward. Alan Bound, Principle, Bound and Associates, thank you
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  Speaker 1: for joining us talking about automobile maker shares a Ford
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  Speaker 1: down about one and a half percent, GM lower by
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  Speaker 1: nearly one in coming up on taking stock, We're gonna
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  Speaker 1: take stock of where to put your money. We've got
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