Market Monitor Automotive United States 2016

Market Monitor

  • Etats-Unis
  • Automobile/Transports

27 oct. 2016

As car sales approach the pre-recession peak, the sector needs to adjust from what has been a growth environment to a more steady-state market situation.

  • Growth continues, but the market will be steadier in the future
  • Payments take 30-60 days on average
  • Low number of insolvency cases

After the 2008 economic crisis US vehicle sales declined to 10.4 million units in 2009. However, sales have steadily risen every year since then, and reached 17.9 million units in 2015. Automotive production (cars and commercial vehicles) increased 3.8% in 2015, according to the Organisation Internationale des Constructeurs d’Automobiles (OICA). Light vehicle sales (passenger cars and light trucks) increased 1% year-on-year in the period January-July 2016, to more than 10 million units.

On-going low oil prices continue to have an impact on US household vehicle-buying patterns, with a shift in demand for larger vehicles, especially towards crossover utility vehicles. At the same time, with consumers benefitting from low gas prices, more miles are being driven, which has a positive impact on the aftermarket/replacement market.

The US automotive market is expected to grow further in H2 of 2016 and early 2017, however, excess capacity coupled with an increase in new products being introduced in key segments will keep pressure on manufacturers’ ability to increase prices. As sales approach the pre-recession peak, manufacturers will need to adjust from what has been a growth environment to a more steady-state market situation. Gross margins of automotive businesses are expected to remain stable in the coming months as the industry continues to benefit from low raw material prices. However, at the same time there is some headwind from a stronger USD. 

In international comparison the US automotive sector remains at the forefront of innovation, as US automotive businesses investmentment in new research and development (R&D) initiatives amount to USD 18 billion per year (compared to USD 100 billion R&D investment by the whole automotive sector worldwide).

Automotive businesses tend to be highly leveraged, since the sector is very capital-intensive. Access to external funding has steadily improved since the 2008 credit crisis, due to improved trading conditions within the sector, relaxation within the traditional credit markets and access to funding via government-backed programmes. Banks are generally willing to lend to the industry.

The average payment duration in the US automotive industry is 30-60 days. Payment behaviour in this sector has been good over the past two years. The number of protracted payments, non-payments and insolvency cases has been low in 2015 and H1 of 2016. Given the stable performance outlook weexpect the current insolvency rate to remain stable.

Due to the generally benign indicators we still assess the credit risk and business performance of the automotive sector as “Good”, and our underwriting stance continues to be open.

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