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