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Page added on November 2, 2016
‘Peak auto’ is a zombie idea that has taken over the US auto market
Morgan Stanley lead auto analysts Adam Jonas published a research note on Wednesday in which he argued that “peak auto” — the idea that the US car sales market has plateaued — is a “stigma” that the industry can’t shake.
“An 18.3-million light-vehicle sales pace for October beat consensus estimates of 17.7 million,” he wrote, citing sales data that was reported on Monday.
“‘Peak auto’ concerns will likely reach new highs and rest of year would need to average 18.3 million in order to attain our FY forecast of 17.6 million SAAR.”
An 18-million plus pace isn’t out of the question for the final two months of the year, particularly given that General Motors, Ford, and Fiat Chrysler Automobiles all have about three months inventory on dealer lots now and could up incentives through December to clear out the supply. Especially given that a lot of what’s currently in dealer channels is pickup trucks.
However, Business Insider spoke with executives from Ford and GM when they reported their third-quarter earnings in October and both stressed that incentives as a whole in the US market are moderating. So we’ll have to see how the year pans out.
“Peak Auto” is one of those theories about what’s going in with US car and truck sales that sounds cool — it evokes the “peak oil” theory, which suggests that all the productive reserves of crude oil in the world have been found and it’s all downhill from here.
The analogy isn’t actually bogus: peak auto suggests that the pent-up demand that was created in the US auto market is getting worked out — and that a slow sales decline is inevitable.
But it isn’t really clear what that would mean for the health of the automakers selling cars in the US. Sales declines would have some affect, but if your mix of vehicles is profitable, it should all be fine and dandy unless the market crashes below a 13 million to 14-million sales pace.
As it turns out, the vehicles that automakers are selling a lot of right now — pickups and SUVs, of all sizes — are quite profitable.
It’s been a good run.Business Insider
Peaks are inevitable — and that’s not a bad thing
It would also be strange to assume that the US auto market, which broke a sales record last year that had stood for a decade and a half, has an excessive amount of untapped potential. Simply replacing worn-out vehicles assures a sales pace of 14 million to 15 million annually, so anything above that it gravy. But unless the US population grows big time or cars become much less reliable, there isn’t really that much gravy to be had.
The real problem with talking about a peak-auto “problem” is that, even as automakers pile up cash, automaker stocks are pricing in a downturn — a downturn that wouldn’t weight very heavily on profits unless is was the result of a sharp and deep recession.
That said, with GM trading at $30, Ford at $11, and FCA at $7, the downside risk is being absorbed by those automakers’ current management — management that has steered all three car companies to record US sales and many consecutive profitable quarters. Ford and FCA investors in particular don’t want to see shares lose a third of their values or more and could be using peak auto as an excuse for sharpening the knives.
Dropping the peak-auto chatter, now that it’s been proven wrong by sales, would go a long way toward avoiding that gruesome outcome.
10 Comments on "‘Peak auto’ is a zombie idea that has taken over the US auto market"
Anonymous on Wed, 2nd Nov 2016 9:49 pm
The take away message is clear.
We need more cars, amerika, so drive, dont walk, or take mass-transit, down to your nearest GM\Fard w\e dealer, get a loan you cant possibly pay back, and drive off the lot in a an asset that instantly loses 30% of its value as soon as you sign the papers.
Bullshit Insider says driving is good, good for amerika, good for Exxon, good for everyone.
Hello on Thu, 3rd Nov 2016 2:59 am
You’re angry Anon. Didn’t sleep well?
Davy on Thu, 3rd Nov 2016 6:42 am
Cars are a necessary evil that about sums it up. There is no society that can survive without cars today. You may think that is a bold statement but when you consider it is the most significant economies that maintain the status quo with food, fuel, and products and then you realize they do this because of cars you see our trap. It is a trap because it is just another one of the many modern traps we are trapped in. Everyone else with little access to cars or no access is directly related to the global car culture. We are locals connected and exposed to a dangerously overextended global in over population and at limits to growth. That is the extreme of it but the more moderate of it would be to say one of the most important attitude and lifestyle changes would be to reduce car use especially the discretionary car use related to leisure and consumerism. We can reduce these excessive behaviors significantly.
That sounds great and a worthy cause for many but don’t think for a minute these good action will not happen without negative consequences. Leisure and consumerism is a significant part of the global economy. Car manufacturing is a significant part of the economy. Decrease the contribution of these economic sectors and you put an already dangerously slow growing global economy into recession or worse. The reality is the “worse” is likely a collapse.
I hate cars with a passion spiritually because if you want to point to one advancement of modern man that allowed for the extremes of modern man it is our embrace of the car or better said, internal combustion engines. We walked away from very capably and sustainable transport. We used to have human and animal labor that worked very well. Not for 7BIL but maybe 2BIL. We walked away from that for the most part. It doesn’t matter some is still left in the third world because that is irrelevant for the status quo and the bulk of the global population. Our exposure to the loss of mass transport and transportation is one of those variables that will throttle population down in a die off.
Cars are killing us and when their wheels are upside down turning in vain in some heap of debris many of us will be dead. Cars have helped ruined our culture by basing status and identity on a metal status symbol. We are fat and lazy because of cars. Travel used to be a major effort and event but now it is routine. We have turned the world into one big homogenous car ugliness. That said I have cars and I use them. I am trying to use them less. I am practicing relative sacrifice by not traveling except when it is necessary to maintain my life. I have cut way back on discretionary travel and the only reason I do any of it is because of family. The wife, kids and immediate family are not at the intellectual and spiritual level I am. That is probably a good thing because too many people like me and the status quo would be in danger. The end of the status quo will involve some kind of die off. Don’t kid yourself because it may be your end. I am using the status quo to leave it best I can. This way of life I am embracing is not perfect and full of contradictions. It is surreal to drive down the highway and realize what these highways represent and what will happen to life when they are of little use.
If you want to be green then stop driving and flying as much as possible. All the other greenshit is dumbshit. EV’s and solar have their place in transport but the reality of the situation is they are still dirty and fossil fuel dependent. It is only the changing of attitudes and lifestyles of doing less that is green. Wanting more for less is a joke because society can’t control more with less and it turns into more with more. Cars brought us here but to be fair a large out of control large brain that found ways to get around then discovery how to get around with fossil fuels is the real culprit.
Shortend on Thu, 3rd Nov 2016 8:04 am
Perhaps we all should just go off in the forest and forage with the animals…just kidding.
A number of years back the founder of the Whole Earth Catalog of the 1970’s/80’s, Stewart Brand, shocked us greenies by voicing support of technology like nuclear power and pesticides; stating that we are deceiving ourselves if we think we are out of the loop by going back to the land, so to speak.
He pointed out once we purchase a shovel at the hardware store we are knee deep in BAU and the system.
Eliot Coleman, grand guru of organic farming, needs BAU to keep his Four Seasons Farm producing in Harborside Maine.
Yes, full of contradictions.
makati1 on Thu, 3rd Nov 2016 8:16 am
Sorry, a shovel is hardly “knee deep” in BAU. They have been making shovels for centuries. In neolithic times and earlier a large animal’s scapula (shoulder blade) was often used as a crude shovel or spade.(WIKI)
Now buying a gas hog vehicle is “knee deep” or buying a PC or anything that we do not “need”. But it sounds like he was just making excuses for not living off the land.
Kenz300 on Thu, 3rd Nov 2016 10:51 am
Electric cars, electric trucks, bicycles and mass transit are the future. Fossil fuel ICE cars are the past.
Shortend on Thu, 3rd Nov 2016 11:36 am
Mak…read it right…BUYING a shovel at the hardware store, Home Depot, ect
So, next time you need a shovel…go make it yourself!!!
Oh, that’s right, you are outside of BAU residing in the Philippines (sarcasm).
Believe me when it stops you will holding the wrong end of the stick.
FNORD on Thu, 3rd Nov 2016 12:37 pm
Whats next? peak doom porn?
Ghung on Thu, 3rd Nov 2016 2:02 pm
Shortend said; “Eliot Coleman, grand guru of organic farming, needs BAU to keep his Four Seasons Farm producing in Harborside Maine.
Yes, full of contradictions.”
Only for binary-thinking simpletons. Funny how people insist on over-simplifying very complex issues and expecting puritanical all-or-nothing responses to what awaits us. Nothing works that way. Pretending it does in order to marginalise people and their responses isn’t helpful at all. Do you think Eliot Coleman should stop paying taxes because taxes are part of current BAU? Not have health insurance for his employees? Take his goods to markets with a horse and wagon?
Jeez….
Shortend on Thu, 3rd Nov 2016 2:20 pm
Ghag, stick the topic at hand and don’t go off in unrelated topics. BTW, read what I wrote….me thinks the simpleton should look in the mirror….