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Auto and auto parts companies impact U.S. economic growth which is a debt led consumer economy. With spiralling auto debt it affects the whole finance pyramid. The U.S. auto industry helps drive industrial production, service and finance industries and insight into consumer trends.

First Cars
Cars have come a long way

Of the “big three” US automakers only Fiat Chrysler reports monthly forecasts with Ford and General Motors just providing quarterly reports.

The American Car Industry Impacts The Macro and Micro Economy

What Analysts Are Watching

Monthly auto and truck sales give us a clearer insight into GDP forecasts and the varying components. The numbers also help analyse earnings prospects for the auto industry.

The United States is a consumer led economy, and it has become a debt led economy with Quantitative Easing making it clear, We have spiralling auto debt, current card debt, student debt and the list goes on. The U.S. auto industry plays a significant role in helping to drive industrial production, the service industry and the finance industry.

Auto and auto parts companies account for millions of jobs both in the U.S. and around the world, The hiring characteristics of auto and truck sales is an important labor market indicator. Auto and truck sales factor into the PCE (personal consumption expenditure) component of GDP,  this is "hard" data that influences forecasts for each quarter's GDP and PMI' reports..

Quantitative easing and the cultural change in the U.S. has seen consumers expect incentives and the big question is how much they drive sales. Can sales can be achieved incentive spending, will loans be repaid and how much does this undermine the auto and finance computer profitability.

Stocks Impacted

The Carmakers

  • Ford (F)
  • General Motors (GM)
  • Fiat Chrysler (FCAU)
  • Toyota Motor (TM)
  • Honda Motor Co. (HMC)
  • Nissan Motor (NSANY)
  • Volkswagen AG (VLKAY)
  • Tesla (TSLA)

For auto sales we watch for monthly sales from industry consultants J.D. Power and LMC Automotive and well as government retail sales reports..

In 2017 U.S. auto sales fell 2 percent after hitting a record high of 17.55 million in 2016. Sales were expected to fall again in 2018, partly as a result of rising interest rates and fuel prices. There is also a mass used vehicles coming off lease and tariff affects in 2019.

The Auto Parts Companies

  • Johnson Controls (JCI)
  • Borg Warner (BWA)
  • Lear (LEA)
  • Delphi Automotive (DLPH)
  • Magna (MGA)

The Auto Parts Retailers

  • AutoZone (AZO)
  • O'Reilly Automotive (ORLY)
  • Advanced Auto Parts (AAP)

The Auto Dealerships

  • CarMax (KMX)
  • AutoNation (AN)
  • Group 1 Automotive (GPI)
  • Asbury Automotive Group (ABG)
  • Lithia Motors (LAD)
  • Penske Automotive Group (PAG)
  • Sonic Automotive (SAH)

 

Impacts on Auto Sales

Automobiles represent the largest manufacturing industry in the U.S., and no other industry generates more business across so many industry sectors. Jobs related to the auto industry go far beyond designing, building, and selling vehicles. America’s automakers are among the largest purchasers of aluminum, copper, iron, plastics, rubber, textiles, steel, computer chips and more. - Auto Alliance

Interest Rates

Gasoline and diesel prices

Electric vehicle prices

Insurance rates

Revenue and Sales Taxes

According to the Auto Aliiance auto manufacturing drives $953 billion into the economy each year through the sales and servicing of autos and flows through the economy, from revenue to parts suppliers to paychecks for assembly plant workers, from income for auto-related small business to revenue for government.

Tariffs

Among G-20 countries, the major economies of the world, every country except one — Saudi Arabia — manufactures autos.

G 20 Auto Makers

Employment 

The Auto Alliance says a robust auto manufacturing sector is vital to a healthy U.S. economy. Autos drive America forward by supporting a total of 7.25 million American jobs, or about 3.8 percent of private-sector employment.

Auto Jobs In US Economy

Trends

Incentives

Ride sharing companies demand, Lyft and Uber

How much do these factors impact? A closer look U.S. light vehicle sales shows they have fallen from a seasonally adjusted annual rate (SAAR) of 17.13 mln units in January from a 18.00 mln run rate in December and 2.3% below the SAAR of 17.54 mln units for January 2018.

General Motors filed at the end of June 2018 with the U.S. Commerce Department warning that the expansive U.S. tariffs on imported vehicles being considered by the Trump administration will damage $GM, U.S. jobs and American global presence.

"Increased import tariffs could lead to a smaller GM, reduced presence at home and abroad for this iconic American company, and risk less - not more - US jobs" GM said

GM commented  the U.S. has been aggressively pushing tariffs with steel and aluminum the first big ones and then was steadfast where he stands at the recent G7.  By March 2019 there is still not a trade deal with Europe or China which is affecting the car industry and the drip down affect immensely.

"The threat of steep tariffs on vehicles and auto component imports risks undermining GM's competitiveness against foreign oil producers by erecting broad brush trade barriers and increase our global costs, remove a key means of competing with manufacturers in lower wage countries, and promote a training environment in which we could be retaliated against in other markets"

Tariffs affect in another way, how many auto parts do you think come from outside of America and how many are used in cars, including U.S. made sold to the American consumer. Take a look at the image below, how many do you think?

 Auto Parts

U.S. President Donald Trump’s threat to impose a 25 percent tariff on imported cars risks a further hit to vehicle demand and profits for automakers,

Auto stocks have been whipsawed by macro volatility around trade tensions and expectations. With regards to China trade with is one of potential due to ‘source in region, build in region, sell in region’ strategies. Tariffs on European and NAFTA vehicles are also impacted through political events and dealings.

Source: TradersCommunity, Auto Alliance, Reuters

From The TradersCommunity Research Desk

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