Q2 2012 Global Auto Earnings: four not so obvious thoughts

While everyone is laser focused on the imploding European auto industry and we ponder the sustainability of the US volume recovery, there are a few things to keep an eye on that may not be top-of-mind:

1) Latin America: The meteoric growth of the Brazilian market has slowed to standstill and surrounding markets have stalled as well.  While the industry has expected the flattening market, a steep rise in  low-cost imports has created pricing pressure.  Companies like Fiat, GM and VW who had been enjoying the tailwinds of strong double-digit margins over the past decade will feel the pinch this first half.

2) China may look like last year in terms of volume growth, but rising inventory levels — especially for the luxury makes like BMW and LR Jaguar — mean a squeeze on margins.  The J3 have re-ramped production, however even Nissan is overstocked at 60+ days and will have to give up some pricing to get inventory inline.

3) Turkey: an ace in the hole particularly for Fiat, Ford, VW and Renault is down nearly 20% this year.  A great production base with a non-Euro currency base, this volatile market won’t provide the same boost as it did last year when sales were up 54% in the first half last year.

4) Russia sits on the plus side and remains an opportunity at +10% volume, however, margins vary greatly from maker to maker.

Just some thoughts as we struggle with Europe and worry over the sustainability of the US volume rebound

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