Cox Automotive President Sandy Schwartz (far left) hosted a panel at the Atlanta Economics Club last month of the top execs from Atlanta’s locally-headquartered auto manufacturers: (l-r) Larry Dominique, president and CEO, PSA North America Inc.; Klaus Zellmer, CEO, Porsche USA; and Deitmar Exter, CEO, Mercedes-Benz USA. Before this panel, I provided a high-level overview of how Cox Automotive views the auto market.
Photo credit: Chris Hunt Photography/Atlanta Journal-Constitution
The big picture: Heading into the new year is good time to look at the auto market as a whole and the factors we see driving change. Here are my Top 10 insights on the auto market.
Insight #1: The auto market is large and complex. Though there is a lot of focus on new-vehicle sales, the used-vehicle market account for 70 percent of industry volume and approximately 56 percent of its value.
Insight #2: The auto market is cyclical and tied to the economic cycle. We are in the post peak part of the cycle and 2018 ended relatively flat as compared to 2017.
Insight #3: The auto market is very dependent on credit. Lending grew by 4.6 percent year-over-year in Q3. This was driven by a 10 percent gain in subprime pending and an 8 percent gain in 760+ credit score loan volumes.
Insight #4: Like housing, demand is rate sensitive. The discount rate is up 1 percent while best available auto rates are up 1.3 percent year-over-year; and up 2.4 percent from absolute low.
Insight #5: The auto market sees big regional variation in sales trends. In 2018, the year-over-year change in new-vehicle registrations varies greatly depending on where in the U.S. you are – with change spanning from -3.4 percent to 4.7 percent.
Insight #6: The market has great variety in product. Across 17 key new-vehicle segments, average prices range from $17,531 to $103,512.
Insight #7: The market is dependent on a global supply chain. The composition of new vehicles sold in the U.S. come from five major places of origin: U.S., Mexico + Canada, Japan, South Korea and Europe.
Insight #8: The used-vehicle market is supplied by a wholesale market. The new-vehicle market ultimately supplies the wholesale market, but composition can vary dramatically.
Insight #9: Dealers sell cars. And, dealers’ ability to sell cars is affected by the economy in various ways. In the Q4 2018 Cox Automotive Dealer Sentiment Index, dealers indicated that market conditions, credit availability for consumers and limited inventory are the top three factors holding back their business.
Insight #10: Disruption has started. According to the Cox Automotive Evolution of Mobility Study, 39 percent of survey respondents said having transportation is necessary but owning a vehicle is not. This is up from 35 percent three years ago.
Why it matters:
The auto sector represents a significant share of the economy, so its health has an impact on Atlanta where Cox Automotive and these companies are headquartered but it clearly impacts the entire country.
Get Top 10 Insights on Auto Market
Heading into the new year is good time to look at the auto market as a whole and the factors we see driving change. Here are my Top 10 insights on the auto market.Download