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Has the auto industry already priced in a recession?

on Oct 12, 2022
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  • Pro shares his outlook on auto industry in the face of economic downturn.
  • Cox Automotive expects the U.S. new-vehicle sales to climb 7.0% this year.
  • Auto stocks have not done all that well since the start of the year 2022.

Auto industry is somewhat insulated from the impact of an economic downturn even though the constituent stocks haven’t done all that well this year, says Mark Fields – the former CEO of Ford Motor Company.

Auto companies are better positioned

Much like any consumer facing business, the auto industry, he agreed, counts the deteriorating macro environment and a weakening consumer as significant headwinds. Where it’s better positioned, though, is on the inventories front.

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Auto industry is not facing rising inventories. There’s a lot of pent-up demand because last two years, industry volume has dropped 20% on supply issues. That’s the average this industry sees during an economic downturn. So, we’ve already had it.

Another positive is the semiconductor supply that Fields said was now getting a little better at least for the auto industry.

Cox Automotive expects the U.S. new-vehicle sales to climb 7.0% this year.

Rate hikes not an issue for auto industry

Last month, the U.S. central bank said it’ll continue to lift rates until they hit 4.6%. But Fields doesn’t expect further hikes to be much of a threat for the auto industry. On CNBC’s “Squawk on the Street”, he said:

Even if you see continued demand destruction, automotive companies need to restock inventories at their dealers. So, the impact of this downturn will be more muted, less severe than we typically see in auto industry in economic downturn.

Continued demand from business fleets will help this space keep resilient in the face of a downturn, the expert concluded.

A week earlier, Invezz reported Ford’s EV sales to have nearly tripled on a year-over-year basis in September.