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Forecast shows global auto sector set for healthy 2018 – time to buy auto stocks?

by | 19 Feb, 2018

Full speed ahead for car makers?

A new look into the global auto sector has shown its prospects are healthier than many had expected, despite annual sales declines in North America.

Market research firm LMC Automotive said global auto sales are expected to hit record sales of 97.3 million vehicles in 2018, with interest in cars and light trucks resulting in a 2.1 per cent increase in global demand.

LMC said global light vehicle sales grew by 7 per cent year-on-year in January, while China was a key contributor, on top of Western Europe delivering a surprisingly strong month.

Indeed, the car market in Europe opened the year with a 6.8 per cent sales upswing in January off the back of the regions improving economy. Firms including Volkswagen, Renault, Fiat Chrysler, Skoda and others all saw impressive gains, particularly in new SUV models.

The biggest increases this year are expected in Latin America as well as Central and Eastern Europe, and will help to lift investor sentiment for those who have money in auto stocks. However, the prediction will do little to alleviate the real spectre hanging over the auto market, which is of course the rise in autonomous vehicles, the widespread adoption of which would likely lead to a fall in auto sales for regular customers, despite questions over consumer willingness to adopt new technologies. Autonomous vehicles could provide more Uber-like (lift sharing) services and reduce the need for personal ownership.

Indeed, a report by financial services firm Credit Suisse said an influx in self-driving car services that could trigger growth in ride-sharing providers such as Uber and Lyft could cause new-car sales to plummet by 2030. The rationale behind this is that eliminating the need to pay for human drivers could increase the profitability of ride-sharing services, thus denting personal ownership as people start using lift-sharing more often instead.

Regardless though, for the time being the demand for private cars in emerging markets looks healthy and will likely offset America’s falling sales. 

Related: Alibaba makes moves into auto sector – leads major investment in Xiaopeng Motors

The S&P500 automobiles index (seen in grey) underperformed over the last 5 years against media (blue), pharmaceuticals (red), industrials (yellow) and I.T. (green)

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.
Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.
Brokerage services are provided by the following:
US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth LLC, a regulated member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. For more information, including disclaimers, risk and transaction fees click here.
India account traded securities are provided by SIC Stocks & Services PVT Ltd. SIC does not make any personal recommendations to buy, sell or otherwise deal in investments. Investors make their own investment decisions. The services and securities provided by SIC may not be suitable for all customers and, if you have any doubts, you should seek advice from an independent financial adviser. For more information and disclaimers, click here.

 

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