• Market Crumbs

Global Auto Industry Slowing, But Could It Get Worse?

The auto industry is one of the most important sectors of the global economy. The Organisation Internationale des Constructeurs d'Automobiles, an international trade association of 39 national auto industry trade associations, found 5% of the world’s total manufacturing employment is due to the auto industry. Further, it suggests each direct auto job supports at least another five indirect jobs.

Given the broad reach the sector has on the global economy, it's worth writing about the headwinds the industry faces. According to Fitch Ratings, global car sales are expected to fall by about 3.1 million units this year, which would mark the largest unit decline since the financial crisis. 

Sales in China, the world's largest auto market, declined 11% through the first 10 months of this year versus the same period last year. A slowing Chinese economy and stricter emissions standards are causing a drag on new auto sales. 

It's not just China, though, as Fitch sees auto sales in the U.S. declining by 2% this year. Auto executives clearly see a weakening sector also, as Ford, GM and Honda have all scaled back production this year.  

The ramifications of the slowdown are having broad effects, particularly on global manufacturing. "The downturn in the global car market since the middle of 2018 has been a key force behind the slump in global manufacturing and the car sales picture is turning out a lot worse than we expected back in May," Brian Coulton, chief economist at Fitch Ratings, said in a statement.

Over the last week, we've already seen layoffs hit the auto sector.  Continental announced it will eliminate 5,040 jobs by 2028 as stricter emissions standards threaten demand for combustion engine components. Audi announced it will lay off as many as 9,500 employees in Germany by 2025 as part of a restructuring plan to transition to the era of electric vehicles.  

This trend may only be beginning as the move to electric vehicles and the death of the internal combustion engine seems all but inevitable. Given the fact electric vehicles require a fraction of the components as regular cars do, auto industry job losses could extend far through the supply chain. Auto manufacturers are also increasingly turning to robots to build cars as Porsche recently displayed with its new electric vehicle, the Taycan. 

It's not just stricter emissions standards and a weakening economy weighing on demand. The increased popularity of ride-sharing services could pose a long-term threat to the industry. 

"Structurally, environmental concerns about diesel cars — and anticipated regulatory responses — and the growth of ride-hailing and car-sharing schemes are weighing on auto demand," said Coulton. 

The auto industry is in the midst of a huge structural change as electric vehicles become more prevalent. With an industry that employs tens of millions of people globally, a prolonged slowdown could have ramifications throughout the world. 

Leftover Crumbs

  • That could take a while. The Federal Aviation Administration will inspect each of Boeing’s 737 Max planes individually before they can be delivered to customers. Despite Boeing believing they will be able to get approval this year, the FAA says it has no timetable for when they will approve the plane's return to market. "The FAA has determined that the public interest and safety in air commerce require that the FAA retain authority to issue airworthiness certificates and export certificates of airworthiness for all 737 Max airplanes," said the FAA's letter.

  • Will they use it for money-laundering? HSBC will move $20 billion worth of assets to "Digital Vault," a new blockchain-based custody platform by March. The platform will allow investors to view real-time records of private placements and make queries on their holdings. The move marks one of the largest blockchain deployments for a global bank to date. HSBC didn't disclose how much money it could save them or their clients, but if they want to expand the program they could as they have about $50 billion in private placement assets.

  • Time to log in to that old Twitter account. Twitter is emailing users who haven't signed in for more than six months warning them to do so by December 11 or their username will be available for others to take. The process to remove inactive accounts and make them available for others to grab "will happen over many months." "As part of our commitment to serve the public conversation, we’re working to clean up inactive accounts to present more accurate, credible information people can trust across Twitter," said Twitter. 

  • And you thought the blue screen of death was bad. Cryptocurrency theft is on the rise compared to last year, according to a report from blockchain forensics company CipherTrace. Losses from digital currency crimes increased to $4.4 billion through the first nine months of 2019 compared to $1.7 billion during all of 2018. Two large thefts, a $2.9 billion heist from PlusToken and a $195 million heist from QuadrigaCX, helped fuel the increase in losses. "Even without the two biggest thefts and scams, we are still witnessing many multi-million dollar crimes," Dave Jevans, CipherTrace CEO said. "There is a relatively consistent increase in criminal activity year over year and we don’t expect that to change overnight."

  • The price you pay for forced blackouts. According to a report from PropertyShark, California accounts for approximately 73% of the country’s most expensive ZIP codes. Of the nation's top 125 priciest ZIP codes, California accounted for 91 of them; up from 82 in 2018 and 77 in 2017. Atherton’s 94027 is the most expensive ZIP code in the country for the third year in a row with a median sales price of $7.05 million. San Francisco is home to 13 of the nation’s priciest ZIP codes, which is the highest number of any city. In a sign the tech bubble is alive and well, the Bay Area is home to more than half of the country's most expensive ZIP Codes.