key trends of 2019 q1 update - cox automotive inc. · new auto 60 mo. new auto 48 mo. used auto 36...
TRANSCRIPT
Jonathan Smoke | Chief Economist, Cox Automotive
KEY TRENDS OF 2019Q1 Update
THE ECONOMY
ECONOMIC GROWTH SLOWS AS HEADWINDS MOUNT
Source: United States Bureau of Economic Analysis
Real GDP growth will slow to no more than 2.4% in 2019 while risk of recession grows
US ECONOMIC GROWTH SINCE WORLD WAR II
2.9
2.4
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
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F
Annu
al %
Cha
nge
Recession Real GDP Growth (Annual)
TAX REFUNDS
SURPRISES AND FALLOUT FROM LOWER & SLOWER 2019 TAX REFUNDS
Millions of households likely to be in a different position relative to tax refunds than they are accustomed
• 78% of filers surveyed in February said they were surprised by their refund amount
• Through March 29:- Total number of refunds down 2.2%- Total $ amount of refunds down 2.9%- Average refund down 0.7%
• An estimated 8 million filers now likely to owe when they received a refund last year
Impact to economy yet to fully unfold
• Consumer spending likely to be negatively impacted
• Consumer credit conditions likely to deteriorate
• Updated W4 will lead to higher withholdings and lower disposable income
INTEREST RATES
0
1
2
3
4
5
6
7
8
9
%
Interest RatesNew Auto 60 Mo New Auto 48 Mo Used Auto 36 Mo US 10 Year Treasury Fed Discount Rate
Source: Bankrate.com, US Federal Reserve, Bloomberg
“BEST AVAILABLE” AUTO RATES CONTINUE TO PUSH HIGHER
Despite declines in Treasury rates in Q1, best available auto rates remain higher >1%, now up 2.37% from low
AUTO LENDING
Source: Equifax
SUBPRIME AUTO LOANS CONTINUE TO SEE RISING DELINQUENCY RATE
Subprime severe delinquency rate at highest level in a decade, but overall delinquency rate has not risen as much
AUTO LOAN SEVERE DELINQUENCIES UNIT RATE
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
Total 60+ Unit Rate Subprime 60+ Unit Rate 12 per. Mov. Avg. (Total 60+ Unit Rate) 12 per. Mov. Avg. (Subprime 60+ Unit Rate)
CONSUMER PREFERENCE
Source: Autodata, Kelley Blue Book
DECLINE OF CARS BOTTOMS OUT, BUT AFFORDABILITY WORSENS
The SUV has lost share so far in 2019 as car share decline reversed
32%
16%
47%
5%0%
10%
20%
30%
40%
50%
60%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
New Vehicle Sales by CategoryCAR PICKUP SUV VAN
7%
47%
24%
16%
6%
2%
33%
23%
18%
24%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
< $20,000 $20,000-29,999
$30,000-39,999
$40,000-49,999
$50,000+
Distribution of MSRP by Year2012 2013 2014 2015 2016 2017 2018 2019
NEW VEHICLE SALES
Source: Cox Automotive, January 2019
NEW VEHICLE SALES RESUME MODERATE DECLINE TREND
17.2
8
9
10
11
12
13
14
15
16
17
18
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2016
2018
2020
COX AUTOMOTIVEFULL-YEAR FORECASTS
2018
17.22019
16.82020*
16.5
LIGHT VEHICLE SALES OUTLOOK (MILLIONS)
2019 YTD
16.9
USED VEHICLE SALES
Source: Cox Automotive, January 2019
USED VEHICLE SALES PLATEAU
39.4
25
28
31
34
37
40
43
46
2000
2002
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2010
2012
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2016
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2020
COX AUTOMOTIVEFULL-YEAR FORECASTS
2018
39.42019
39.42020*
39.2
USED VEHICLE SALES OUTLOOK (MILLIONS)
YTD 2019
38.9
USED VEHICLE PRICES
Source: Manheim
USED VEHICLE PRICES SEEING ANOTHER UP & DOWN (REVERSED) YEAR
A challenging start of year but strong spring already delivering another year of abnormal patterns
80.0%
85.0%
90.0%
95.0%
100.0%
105.0%
110.0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52
3-Year-Old Model MMR Index by Week2014 2015 2016 2017 2018 2019
AFFORDABLE USED CARS
(MOST) AFFORDABLE CARS CONTINUE OUTPERFORMING OTHER SEGMENTS
PERCENT CHANGE IN MANHEIM INDEX YEAR-OVER-YEAR MARCH 2019
4.0%
1.8%
7.2%
2.0%
3.4%
2.2%
-1.5%-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
Industry Compact cars Midsize cars Luxury cars Pickups SUV/CUV Vans
Source: Manheim
TARIFFS
TARIFF ACTIONS & KEY DATES
Ratification of USMCA (Report on April 18)
Section 232 Tariff on Imported Autos and Parts(Details by May 18; 15 days to implement)
China Trade Deal (March 1; TBD)
EU Trade Deal
Japan Trade Deal
UK Trade Deal?