Monday, December 17, 2018

Insight: America's new car market is on a knife-edge

When you look at the deals on offer - with payments for a full-on V6 double cab pick-up at around $260 a month - you might be forgiven for thinking new-car ownership still looks like value.

My friend at the bar disagreed, telling me that the typical US consumer is incredibly price sensitive. A notch up in interest rates and lease costs, and the consumer could walk away from buying a new car.?

Everything else we're learning in Los Angeles

The extent to which drivers who have borrowed themselves into significant debt, finding they owe $20,000 on a car they want to dispose of?but which has a $10,000 trade-in value, is also a big concern for the industry, because people with negative equity can’t and won’t go out and?buy a new car.

And it’s not just disappearing consumers who could undermine the carmakers –?massive market shifts are catching them out as well. GM’s recent decision to close three plants and kill 14,000 jobs was mostly a consequence of the collapse in US road car sales as the market swings decisively to crossovers and pick-up trucks.?

The GM plants in question were running significantly under the 80% capacity seen as a break-even point. Figures from LMC Automotive suggest that even after these closures, GM’s will still have four plants operating below 50% capacity.

Between January and October this year 4.61m passenger?cars were sold in the US, down 13% on the same period in 2017. By contrast, 9.65m pick-ups and crossovers were sold, up 8%.?

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