Auto sales will be on the decline in 2019: Ed Kim

Auto sales will be on the decline in 2019: Ed Kim


LIZ: THE NORTH AMERICAN INTERNATIONAL AUTO SHOW, AKA, THE DETROIT AUTO SHOW IN FULL SWING IN THE MOTOR CITY, BUT THE AUTO INDUSTRY ITSELF MAY BE APPROACHING A YELLOW LIGHT. A CHIEF ECONOMIST JONATHAN SMOKE SHOWED UP AND WARNED JOURNALISTS IN DETROIT AND HE SAID THAT THE AUTOMOTIVE SECTOR IS GOING TO CAUSE THE NEXT RECESSION. NOT THE HOUSING SECTOR. YAY, AREN’T WE GLAD WE INVITED HIM. LISTEN, IS IT TRUE? IF YOU LOOK AT WHAT’S BEEN HAPPENING, IT IS ON THE HEELS OF ELON MUSK ANNOUNCE ELON MUSK ANNOUNING 7% OF TESLA’S WORKFORCE WOULD BE LAID OFF AS THEY SEEK TO INCREASE MODEL 3 PRODUCTION BUT ALSO CUT PRICES TO MOVE THE CARS OFF THE LOT. THAT’S WORKERS LOSING THEIR JOBS AT TESLA. THE THIRD AUTOMAKER IN FOUR WEEKS TO ANNOUNCE CUTS FOLLOWING GENERAL MOTORS AND FORD. WHERE IS THE AUTO INDUSTRY IN 2019? WE BRING IN TIM HIGGINS TECH AND AUTO REPORTER FOR THE “WALL STREET JOURNAL” AND ALSO THE VP OF INDUSTRY ANALYSIS AT AUTO PACIFIC IS JOINING US. ED, I WANT TO BEGIN WITH YOU. IS THIS WHAT YOU’RE SEEING THE SAME AS WHAT THE COX AUTOMOTIVE GUYS ARE SEEING?>>I DON’T KNOW THAT I’M NECESSARILY READY TO SAY THAT THE AUTO SECTOR IS GOING TO CAUSE THE NEXT RECESSION. BUT WHAT I CAN DEFINITELY SAY IS THAT AUTO SALES ARE ABSOLUTELY GOING TO BE ON THE DECLINE FROM HERE ON OUT. 2018 WAS A VERY VERY GOOD YEAR BY ANY STANDARD, 17.3 MILLION UNITS, BUT WE’RE EXPECTING ABOUT 16.8, 16.9 MILLION SALES IN 2019. AND THERE’S A WHOLE LOT OF REASON FOR THAT THAT ACTUALLY HAVE NOTHING TO DO WITH THE ECONOMY. ECONOMY ASIDE, WE WERE ALREADY PREDICTING REDUCED AUTO SALES FOR A VARIETY OF REASONS, EVERYTHING FROM — EVERYTHING FROM PENT-UP DEMAND FROM THE LAST RECESSION ALREADY BEING FILLED TO RISING INTEREST RATES TO THE FACT THAT NEW VEHICLE PRICES HAVE BEEN CONTINUING TO CLIMB, MEANING THAT PEOPLE ARE UPSIDE DOWN IN THEIR LOANS LONGER BECAUSE THEY ARE TAKING OUT LONGER AND LONGER AUTO LINES WHICH MEANS IF THEY ARE UPSIDE DOWN, LONGER, THEY CAN’T REPLACE THEIR VEHICLES AS OFTEN AS THEY COULD IN THE PAST. SO FOR ALL THOSE REASONS, WE’RE DEFINITELY LOOKING AT A DECLINE IN AUTO VOLUMES FOR THE FORESEEABLE FUTURE. LIZ: THESE ARE MULTIPLE ISSUES, AND THEY ARE ALMOST IN CERTAIN CASES SPECIFIC TO EACH COMPANY. GENERAL MOTORS SAID IT JUST CAN’T SELL SOME OF ITS SEDANS ANYMORE. TESLA OF COURSE HAS COMPLETELY DIFFERENT ISSUES THAT PROBABLY DON’T SURPRISE A LOT OF PEOPLE BECAUSE THEY’VE HAD TO FIGURE OUT AS THEY GO ALONG BEING THE YOUNGEST AUTO COMPANY AROUND, IN THE BIG GROUP.>>SURE. LIZ: AND THEN OF COURSE FIAT CHRYSLER HAS ITS SPECIFIC ISSUES, THE CEO, MAY HE REST IN PEACE, HE DIED, AND THEY ARE DEALING WITH THAT SITUATION, AND PUT THEM ALL TOGETHER, AND DOES THIS EQUAL RECESSION IN YOUR EYES?>>WELL, THERE’S A COMMONALITY HERE, THESE AUTOMOTIVE EXECUTIVES ARE LOOKING AHEAD AND SAYING WE SEE SOME DARK CLOUDS ON THE HORIZON. CHINA, SALES THERE DECLINING FOR THE FIRST TIME IN A GENERATION LAST YEAR. YOU LOOK AT THE U.S., JUST TALKED ABOUT SOME CHALLENGES THERE, AND THEN YOU LOOK AT THIS OTHER THING, THE ELECTRIC CAR. CHINA PUSHING GLOBAL AUTOMAKERS TO INVEST HEAVILY THERE, THAT MEANS THEY HAVE TO SPEND A LOT OF MONEY ON THIS NEW TECHNOLOGY, PLUS THERE’S CONCERNS ABOUT COMPANIES LIKE UBER AND AUTONOMOUS VEHICLES. SO THEY ARE HAVING TO SPEND A LOT ON THE FUTURE, WHILE AT THE SAME TIME, THE PRESENT IS VERY UNCLEAR TO THEM. LIZ: ED, SEDAN SALES HAVE COLLAPSED; RIGHT? I MEAN, YOU CAN’T FORCE PEOPLE TO BUY CARS THEY DON’T WANT TO BUY, THAT AREN’T COOL OR DON’T QUITE WORK. THAT’S NOT THE PROBLEM AT TESLA. THAT MODEL S IS CERTAINLY HOT. BUT THEY HAVE THEIR OTHER ISSUES. I’M TRYING TO GET THE SENSE OF PEELING AWAY THE ONION LAYERS AND FIGURING OUT IF THERE’S A COMMON THREAD WITH ALL OF THESE PROBLEMS AT LEAST WITH THESE DISPARATE COMPANIES?>>UH-HUH, WELL IN THE CASE OF TESLA, YOU KNOW, THESE LAYOFFS REALLY DON’T SURPRISE ME IN THE SENSE THAT, YOU KNOW, OF COURSE MODEL 3 HAD A FANTASTIC YEAR LAST YEAR EXCEEDING BASICALLY, YOU KNOW, EXCEEDING EVERYONE’S EXPECTATIONS. HOWEVER, A LOT OF THAT WAS PENT-UP DEMAND FOR THAT CAR SINCE THAT CAR HAD BEEN ANNOUNCED YEARS EARLIER, BUT ON TOP OF THAT, TESLA DOESN’T EXIST IN A VACUUM, NOT FOR LONG ANYWAYS. WITHIN THE NEXT YEAR OR TWO, THERE ARE MULTIPLE LEGACY LUXURY AUTO BRANDS THAT ARE COMING OUT WITH THEIR OWN CARS THAT WILL COMPETE DIRECTLY WITH ALL OF TESLA’S PRODUCTS. SO A VOLUME REDUCTION IN SALES FOR TESLA I THINK IS A GIVEN. AND TESLA NEEDS TO PREPARE FOR THAT. THE COMMON THREAD BETWEEN THAT AND FORD AND GM IS I THINK ALL THREE ARE PROACTIVELY — I GUESS IT IS HARD TO SAY PROACTIVE WHEN WE’RE TALKING ABOUT CUTTING JOBS AND PEOPLE LOSING THEIR JOBS, BUT ALL THREE ARE PROACTIVELY LOOKING TOWARDS THE FUTURE AND REALLY TRYING TO STRATEGICALLY FIGURE OUT WHAT THEY NEED TO DO NOW IN ORDER TO ENSURE THAT THEY ARE HEALTHY IN THE FUTURE, FUTURE AUTOMOTIVE SALES DOWNTURN. LIZ: THEN YOU HAVE LOW GAS PRICES WHICH MAKE PEOPLE WANT TO BUY SUVs, ETC. TIM BEFORE WE GO, I NEED TO KNOW FROM YOU THE SITUATION YOU FOUND AT THE “WALL STREET JOURNAL” REGARDING CARLOS GHOSN WHO IS IN JAIL WEEKS AND WEEKS AFTER HE WAS ARRESTED. HE HASN’T BEEN PROVEN GUILTY. THIS SUN BELIEVABLE TO ME — THIS IS UNBELIEVABLE TO ME AND THE NEWEST NEWS IS THAT CARLOS GHOSN IS OFFERING TO PAY FOR HIS OWN ANKLE BRACELET, PAY FOR SECURITY GUARDS TO KEEP HIM FROM TRAVELING SO HE CAN GET OUT OF JAIL PRETRIAL? HOW MUCH LONGER IS THIS GOING TO GO ON?>>THE JAPANESE LEGAL SYSTEM IS MUCH DIFFERENT THAN HERE IN THE U.S. WE’RE GETTING A PEEK AT THAT. IT’S SOMETHING WE DON’T NORMALLY PAY ATTENTION TO. NORMALLY WHAT HAPPENS AN EXECUTIVE PLEADS GUILTY AND THEN


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