The Auto mobile market is taking bigger hit than probably most of other markets. In the sense that they are impact with the tariffs and interest rate. Cares are probably the biggest purchase on can make after his or her house. But with the economic getting worse, unlike what the media wants you to believe, I think the Auto industry is going to be one of the biggest losers due to the large ticket items associate with the product mostly.
Ford in particular is one of the largest companies in sales in the USA (1). Ford was hit hard in 2009 and had to take money to survive, some 25 billion at that time. I expect them to get hit hard again if the economy turned lower. Further Ford has 150+ billion in debt. That is their whole revenue. Now if this was adjustable interest rate, they would have to pay 1% more on it by the end of the year. Their debt to equity is staggering 433 (2).
Add to that that the Auto sales in the US is retracting (5). The last 4 years sales averaged 17 million, that is some 68 million cars. There is about 120 million household (3) and about 220 million driver (4). If you divide 120/117 is just about 7 and if you divide 220/117 that is just about 13. At that rate, it means that every household gets a new car 7 years and that every driver in the country gets a new care every 13 years. With that, it means we should not see cars older than 2005 on road by the end of this year. We know that this is not true.
The Auto sales have been fulled by cheap money, in-house finances, no credit and no job applicants, and fictitious recovery. I think it will be the first indicator that we are taking the turn down since there are more cars than homes and also due the price point. When people cannot afford a house, that is one thing. But one people cannot afford a car, you know it is time to strap down.
I am going to short Ford at 11:50 and see where that is going to take me!
(1) – https://www.statista.com/statistics/232958/revenue-of-the-leading-car-manufacturers-worldwide/
(2) – https://finance.yahoo.com/quote/F/key-statistics?p=F
(3) – https://www.census.gov/quickfacts/fact/table/US/PST045217
(4) – https://www.statista.com/statistics/191653/number-of-licensed-drivers-in-the-us-since-1988/
(5) – https://fred.stlouisfed.org/series/TOTALSA
Another angle on this could be to play the auto loan companies. Like Ally Financials and Wells Fargo.
https://www.nasdaq.com/article/which-us-banks-hold-the-largest-share-in-the-countrys-auto-lending-industry-cm708154