Wall Street Wakes Up to #Carmageddon
by Wolf Richter
WolfStreet.com
Jun 9, 2017
Auto industry faces “Unprecedented Buyer’s Strike”: Morgan Stanley
After five months in a row of year-over-year declines in auto sales, and therefore after five months in a row of sales that fell below already lowered expectations, the big guns on Wall Street are now seeing the writing on the wall, and are trying to come to grips with it.
“A stretched auto consumer, falling used [vehicle] prices, and technological obsolescence of current cars are ingredients for an unprecedented buyer’s strike,” wrote Morgan Stanley’s auto analyst Adam Jonas in a note to clients.
He now sees a “multiyear cyclical decline.” In this environment, he sees an impaired ability by these stretched consumers to buy new vehicles. He sees a declining “willingness of financial institutions to lend as aggressively as in the past.” He’s particularly worried that even the automakers’ captive finance operations – such as Ford Motor Credit, GM Financial, Mercedes-Benz Financial Services, and Toyota Financial Services – which have been doing everything they could to get people into new cars, are at the end of their wits:
Up to this point, we had believed that competitive forces, particularly the ability of the captive finance subs to find new ways to lower the monthly payment and put “money on the hood,” would help extend the US auto volume cycle a few more years to new heights.
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