Global automakers continue to struggle due to sluggish consumer demand in all major markets. Years of low interest rates, credit stimulus and relatively high level of average employment worldwide were insufficient to boost incomes and revive the idea of owning a car which is increasingly narrowed down to the mere need of transportation which certainly has more pragmatic solutions.

Struggling carmakers should be viewed as a permanent factor weighing down on manufacturing PMIs in the US, Germany, China and India. This is important because at least one US bank (Morgan Stanley) has made a U-turn recently, expecting a mini cycle of economic expansion in 2020. With such intensity in the sales trend it is easy to underestimate when and at which point car sales will bottom out, that’s why any bold outlook for expansion should be taken with a grain of salt. The stock market has recently priced in the rebound in manufacturing PMI, which may be overly optimistic too.

Fitch released the report containing the outlook for automotive industry earlier this week, predicting that sales will decline at an unprecedented pace since the last crisis:

Take a closer look at the chart. You can see that China and several small markets in the aggregate “rescued” carmakers relatively quickly after the last recession. However later, key source of rebound began to lose ground. By changing the vector, China made biggest negative contribution to the car sales in 2018 and 2019.

According to Fitch, slowdown in the global car market was a key force behind the decline in global manufacturing activity. The projected decline of -4% in 2019 is a really scary figure which speaks of itself. This figure is comparable to the rate of decline during the last recession.

Sales in China fell by 11% YTD compared with the same period of last year. YTD decline in the US and Europe was -2%, car sales in Brazil, India and Russia tumbled -5.5%.

Environmental pressure, growing popularity of car-sharing and ride-hailing services, increasing traffic jams in big cities are among the factors that are expected to dampen demand for car sales in the long-term.

Fitch expects that, at best, car sales can be expected to stabilize in 2020.

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